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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ------------- TO -------------
COMMISSION FILE NUMBER 1-7823
ANHEUSER-BUSCH COMPANIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN 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)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 314-577-2000
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
COMMON STOCK--$1 PAR VALUE NEW YORK STOCK EXCHANGE
PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
8 5/8% SINKING FUND DEBENTURES, DUE DECEMBER 1, 2016 NEW YORK STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
--------------------------
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant.
$23,056,951,500 AS OF FEBRUARY 27, 1998
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
$1 PAR VALUE COMMON STOCK 486,420,854 SHARES AS OF MARCH 10, 1998
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DOCUMENTS INCORPORATED BY REFERENCE
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Portions of Annual Report to Shareholders for the Year Ended
December 31, 1997............................................ PART I, PART II, and PART IV
Portions of Definitive Proxy Statement for Annual Meeting of
Shareholders on April 22, 1998............................... PART III
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PART I
ITEM 1. BUSINESS
Anheuser-Busch Companies, Inc. (the "Company") is a Delaware
corporation that was organized in 1979 as the holding company parent of
Anheuser-Busch, Incorporated ("ABI"), a Missouri corporation whose origins
date back to 1875. In addition to ABI, which is the world's largest brewer
of beer, the Company is also the parent corporation to a number of
subsidiaries that conduct various other business operations, including
those related to the production and acquisition of brewing raw materials,
the manufacture and recycling of aluminum beverage containers, and the
operation of theme parks. In 1996, the Company distributed all of the
outstanding shares of stock of The Earthgrains Company, which was formerly
named Campbell Taggart, Inc. ("Earthgrains") as a special dividend to the
Company's shareholders. Earthgrains represented substantially all of the
Company's food products business. During 1996, the Company also sold the
majority of the assets of its Eagle Snacks, Inc. operation to Frito-Lay,
Inc. The remaining assets of Eagle Snacks, Inc. and the Eagle brand were
also sold in 1996.
Financial information with respect to the Company's business segments
appears in Note 10, "Business Segments," on pages 66-67 of the 1997 Annual
Report to Shareholders, which Note hereby is incorporated by reference.
BEER AND BEER-RELATED OPERATIONS
The Company's principal product is beer, produced and distributed by
its subsidiary, ABI, in a variety of containers primarily under the brand
names Budweiser, Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob,
Michelob Light, Michelob Dry, Michelob Golden Draft, Michelob Golden Draft
Light, Michelob Golden Pilsner, Michelob Classic Dark, Michelob Malt,
Michelob Amber Bock, Michelob Hefe-Weizen, Busch, Busch Light, Busch Ice,
Natural Light, Natural Ice, King Cobra, Red Wolf Lager, ZiegenBock Amber,
Hurricane Malt Liquor, Pacific Ridge, Elk Mountain Amber Ale, Elk Mountain
Red Lager, Faust Golden Lager, American Hop Ale, Black & Tan Porter, and
Winter Brew (produced for the holiday season). ABI's products also include
three non-alcohol malt beverages, O'Doul's, Busch NA, and O'Doul's Amber,
which was introduced in 1997. During 1997 the following new brands were
introduced: Hurricane Ice, Catalina Blonde, Michelob Honey Lager, Michelob
Maple Brown, Michelob Pale Ale, Michelob Porter, Michelob Spiced Ale, and
Tequiza. During 1997, ABI discontinued Muenchener Munich Style Amber,
Natural Pilsner, Meridian Blonde, and Michelob Amber Lager, and also
discontinued importing Carlsberg, Carlsberg Light, Elephant Malt, and
Elephant Red Lager. The Company imports Rio Cristal from Companhia
Antarctica Paulista in Brazil, South America and Azteca from Cervecia Rio
Bravo in Tecate, Mexico, under separate distribution agreements. The
Company also imports Kirin Light, Kirin Lager, and Kirin-Ichiban through a
joint venture agreement with Kirin Brewery Company, Ltd., of Japan. ABI
also owns a 25% equity interest in Seattle-based Redhook Ale Brewery, Inc.
Through this alliance, Redhook products are distributed exclusively by ABI
wholesalers in all new U.S. markets entered by Redhook since 1994. During
1997, ABI acquired a 31% interest in Portland-based Widmer Brothers Brewing
Company. Widmer products are distributed exclusively by ABI wholesalers in
all new U.S. markets entered by Widmer.
Worldwide sales of beer by the Company aggregated 96.6 million barrels
in 1997 as compared with 95.1 million barrels in 1996 and accounted for
approximately 80% of the Company's consolidated net sales dollars in 1997.
In 1996 and 1995 the percentages were 81% and 80% respectively. Worldwide
beer volume is comprised of domestic and international volume. Domestic
volume represents Anheuser-Busch beer produced and shipped within the
United States. International volume represents Anheuser-Busch brands
produced overseas by Company-owned breweries and under license and contract
brewing agreements, plus exports from the Company's U.S. breweries to
markets around the world.
Budweiser, Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob,
Michelob Light, Michelob Dry, Michelob Golden Draft, Michelob Golden Draft
Light, Michelob Golden Pilsner, Michelob Classic Dark, Michelob Amber Bock,
Michelob Honey Lager, Michelob Maple Brown, Michelob Pale Ale, Michelob
Porter, Michelob Spiced Ale, Michelob Hefe-Weizen, Busch, Busch Light,
Natural Light, Natural Ice, Red Wolf Lager, ZiegenBock Amber, Pacific
Ridge, Black & Tan Porter, Widmer Biers products, Redhook Ales, Winter
Brew, O'Doul's, and O'Doul's Amber are sold in both draught and packaged
form. Busch Ice, King Cobra, Hurricane Malt Liquor, Michelob Malt, Rio
Cristal, Azteca, Catalina Blonde, Hurricane Ice, Kirin Lager, Kirin Light,
Kirin-Ichiban, Tequiza, and Busch NA are sold only
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in packaged form. Elk Mountain Red Lager, Faust Golden Lager, American Hop
Ale, and Elk Mountain Amber Ale are sold only in draught form.
Budweiser, Bud Light, Bud Ice, Bud Ice Light, Michelob, Michelob Light,
Michelob Amber Bock, Natural Light, Natural Ice, Red Wolf Lager, Michelob
Honey Lager, Michelob Hefe-Weizen, and O'Doul's are distributed and sold on
a nationwide basis. Bud Dry is sold in 49 states; King Cobra in 48 states;
Michelob Classic Dark, Michelob Pale Ale, Busch, Busch Light, and Michelob
Spiced Ale in 47 states; Busch NA, Michelob Dry, and O'Doul's Amber in 46
states; Michelob Golden Pilsner, Michelob Maple Brown, and Hurricane Malt
Liquor in 45 states; Redhook Ale in 41 states; Elk Mountain Red Lager in 39
states; Black & Tan Porter in 37 states; Kirin Lager in 20 states;
Kirin-Ichiban in 18 states; Faust Golden Lager in 15 states; American Hop
Ale in 13 states; Michelob Malt in 12 states; Busch Ice and Kirin Light in
11 states; Michelob Golden Draft and Michelob Golden Draft Light in 10
states; Michelob Porter and Widmer Biers products in 6 states; Elk Mountain
Amber Ale and Tequiza in 3 states; Pacific Ridge, Rio Cristal, Winter Brew,
and Catalina Blonde in 2 states; and Hurricane Ice, Azteca, and ZiegenBock
Amber in 1 state.
ABI has developed a system of twelve breweries, strategically located
across the country, to economically serve its distribution system. (See
Item 2 of Part I--Properties.) Ongoing modernization programs are part of
ABI's overall strategic initiatives. By using controlled environment
warehouses and stringent inventory monitoring policies, the quality and
freshness of the product are protected, thus providing Anheuser-Busch a
significant competitive advantage. This has been communicated to consumers
through a comprehensive marketing campaign, which includes "Born On"
freshness dating on beer packages.
During 1997 approximately 95% of the beer sold by ABI, measured in
barrels, reached retail channels through approximately 860 independent
wholesalers. ABI utilizes its regional vice-presidents, sales directors,
key account and market managers, as well as certain other field sales
personnel, to provide merchandising and sales assistance to its
wholesalers. In addition, ABI provides national and local media
advertising, point-of-sale advertising, and sales promotion programs to
help stimulate sales. The remainder of ABI's domestic beer sales in 1997
were made through twelve ABI owned and operated branches, which perform
similar sales, merchandising, and delivery services as wholesalers in
their respective areas.
There are more than 100 companies engaged in the highly competitive
brewing industry in the United States. ABI's domestic beers are distributed
and sold in competition with other nationally distributed beers, with
locally and regionally distributed beers and, to a lesser extent, with
imported beers. Although the methods of competition in the industry vary
widely, in part due to differences in applicable state laws, the principal
methods of competition are product quality, taste and freshness, packaging,
price, advertising (including television, radio, sponsorships, billboards,
stadium signs, and print media), point-of-sale materials, and service to
retail customers (including the replacement of over-age products with fresh
products at no cost to the retailer). ABI's beers compete in different
price categories. Although all brands compete against the total market,
Budweiser, Bud Light, Bud Dry, Bud Ice, Bud Ice Light, Michelob Golden
Draft, and Michelob Golden Draft Light compete primarily with premium
priced beers. Michelob, Michelob Light, Michelob Dry, Michelob Classic
Dark, and Michelob Amber Bock compete in the super-premium price category.
Busch, Busch Light, Natural Light, Busch Ice, and Natural Ice compete with
the sub-premium or popular priced beers. King Cobra, Hurricane Malt Liquor,
Hurricane Ice, and Michelob Malt compete against other brands in the malt
liquor segment. Elk Mountain Amber Ale, Kirin Lager, Kirin Light,
Kirin-Ichiban, Rio Cristal, and Azteca compete primarily with imported malt
beverages. Faust Golden Lager, American Hop Ale, Black & Tan Porter,
Catalina Blonde, Michelob Golden Pilsner, Michelob Honey Lager, Michelob
Maple Brown, Michelob Pale Ale, Michelob Porter, Michelob Spiced Ale,
Tequiza, Elk Mountain Red Lager, Red Wolf Lager, ZiegenBock Amber, Winter
Brew, Michelob Hefe-weizen, Pacific Ridge, the Redhook products, and Widmer
Biers products compete primarily in the specialty beers segment of the malt
beverage market. O'Doul's and O'Doul's Amber (premium priced) and Busch NA
(sub-premium priced) compete in the non-alcohol malt beverage category.
Since 1957, ABI has led the United States brewing industry in total sales
volume. In 1997, its sales exceeded those of its nearest competitor by more
than 47 million barrels and constituted approximately 45.5% of industry
domestic sales volume, including imports and non-alcohol malt beverage
sales. Major competitors in the United States brewing industry during 1997
included Philip Morris, Inc. (through its subsidiary Miller Brewing Co.),
Adolph Coors Co., and Stroh Brewery Co.
Through various subsidiaries, the Company is involved in a number of
beer-related operations. Anheuser-Busch International, Inc. ("ABII"), a
wholly-owned subsidiary of the Company, negotiates and administers license
and
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contract brewing agreements on behalf of ABI with various foreign brewers.
Labatt Brewing Co. brews Budweiser and Bud Light for sale in Canada. ABI,
through ABII, participates with Kirin Brewery Company, Ltd. in a joint
venture in Japan, Budweiser Japan Company, Ltd., of which the Company is a
90% shareholder, for marketing, distribution and sale of Budweiser. Through
Anheuser-Busch European Trade Ltd. ("ABET"), an indirect, wholly-owned
subsidiary of the Company, certain ABI beer brands are marketed,
distributed and sold in twenty-four European countries. In the United
Kingdom (U.K.), ABET sells Budweiser, Bud Ice, Michelob, and Michelob
Golden Draft brands to the off-trade sectors, while on-trade accounts are
supplied by other brewers and wholesalers. In 1995, ABET and Scottish
Courage Ltd. entered into a joint venture, Stag Brewing Company Limited,
which brews and packages Budweiser at the Stag Brewery near London,
England. In July 1997, ABET purchased Scottish Courage's 50% interest in
the joint venture company giving ABET full control over the management and
operation of the brewery. Michelob, Bud Ice and Michelob Golden Draft
continue to be imported into the U.K. by ABET. Budweiser is also brewed
under license and sold by brewers in Korea (Oriental Brewery Ltd.), the
Republic of Ireland and Northern Ireland (Guinness Ireland Ltd.), and Italy
(Birra Peroni Industriale). In 1995, ABII entered into a contract brewing
agreement with Sociedad Anonima Damm, one of the largest brewers in Spain,
that gives the Spanish brewer rights to contract brew and package beer
under the brand name Budweiser in Spain and supplements the brand's
existing distribution. In early 1996, ABII purchased an equity interest in
Antarctica Empreendimentos e Participacoes ("ANEP"), a subsidiary
representing approximately 75% of the operations of Companhia Antarctica
Paulista ("Antarctica"), one of Brazil's leading brewers, and formed a
strategic partnership with Antarctica. A component of the partnership is a
joint venture company named Budweiser Brasil Ltda. that markets and
distributes locally-produced Budweiser in Brazil. In December 1995,
the Company announced that it had formed a three-way alliance with Compania
Cervecerias Unidas S.A. ("CCU"), the leading Chilean brewer, and Buenos
Aires Embotelladora S.A. ("BAESA"), PepsiCo's South American bottler. Under
the terms of the alliance, a wholly-owned subsidiary of CCU in Argentina
("CCU-Argentina") brews Budweiser under license in Argentina and BAESA
distributes Budweiser and CCU-Argentina brands in certain geographic
regions in Argentina. CCU also distributes Budweiser in Chile. The Company
purchased a small initial minority stake in CCU-Argentina, with options to
increase its holdings in the future. In 1996, the Company formed
partnerships with France's largest, and Europe's second-largest brewer,
Brasseries Kronenbourg, and Gastrodrink, a joint venture between Brasseries
Kronenbourg and Feldschlosschen, a leading Swiss brewer, to distribute Bud
in France and Switzerland, respectively. The agreement with Gastrodrink was
terminated by the Company in the first quarter of 1998 and the Company is
exploring alternative distribution arrangements. In July 1996, ABI through
ABII entered into a licensing agreement with Asia Brewery, Inc. for the
production, sale and distribution of Budweiser in the Philippines. ABI's
beer products are also being sold under import-distribution agreements in
more than 80 countries and U.S. territories and to the U.S. military and
diplomatic corps outside the continental United States.
ABII also negotiates and oversees the Company's investments in
international brewing companies. In 1993, Anheuser-Busch purchased a 17.7%
direct and indirect equity interest in Grupo Modelo's operating subsidiary,
Diblo, for $477 million. In May 1997, the Company increased its direct and
indirect equity ownership in Diblo to 37% for an additional $605 million.
In June 1997, the Company exercised its remaining option to purchase a
further equity interest. Due diligence is complete and the Company and the
controlling shareholders of Grupo Modelo are pursuing arbitration to
resolve a dispute over the purchase price for Anheuser-Busch's additional
shares. When completed, the Company will own a 50.2% direct and indirect
interest in Diblo. However, the Company will not have voting control in
either Grupo Modelo or Diblo. The Company also owns a 5% equity interest in
Tsingtao Brewery Company Ltd., a leading Chinese brewer. In 1995, the
Company purchased an initial 80% equity interest in a joint venture,
renamed the Budweiser Wuhan International Brewing Company, Ltd., that owns
and operates a brewery in Wuhan, the fifth-largest city in China. This
ownership interest was subsequently increased to 86.6%.
The Company's wholly-owned subsidiary, Metal Container Corporation
("MCC"), manufactures beverage cans at eight plants and beverage can lids
at three plants for sale to ABI and to soft drink and export customers.
(See Item 2 of Part 1--Properties). Another wholly-owned subsidiary of the
Company, Anheuser-Busch Recycling Corporation ("ABRC"), recycles aluminum
cans at its plants in Marion, Ohio and Hayward, California. ABRC sold its
recycling facilities in Cocoa, Florida, Nashua, New Hampshire, and
Bridgeport, New Jersey during 1997. The Company's wholly-owned subsidiary,
Precision Printing and Packaging, Inc. ("PPPI"), manufactures metalized and
paper labels at its plant in Clarksville, Tennessee and folding cartons at
its plant in Paris, Texas, which PPPI has announced it intends to sell.
Packaging Business Services, Inc., another wholly-owned subsidiary of the
Company, provides administrative services and develops existing and new
businesses for MCC, ABRC and PPPI.
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The Company's wholly-owned subsidiary, Busch Agricultural Resources,
Inc. ("BARI"), operates rice drying, milling and research facilities in
Arkansas and California; twelve grain elevators in the western and
midwestern United States; barley seed processing plants in Moorhead,
Minnesota, Fairfield, Montana, Idaho Falls, Idaho, and Powell, Wyoming; a
barley research facility in Ft. Collins, Colorado; and a wild rice
processing facility in Clearbrook, Minnesota. BARI also owns malt plants in
Manitowoc, Wisconsin, Moorhead, Minnesota, and Idaho Falls, Idaho. Through
wholly-owned subsidiaries, BARI operates land application farms in
Jacksonville, Florida and Fort Collins, Colorado; hop farms in northern
Idaho and Germany; and an international office in Mar del Plata, Argentina.
Another wholly-owned subsidiary, Anheuser-Busch Investment Capital
Corporation, shares equity positions with qualified partners in independent
beer wholesalerships and is currently invested in 8 wholesalerships.
Through other wholly-owned subsidiaries, the Company owns and operates
a marketing communications business (Busch Creative Services Corporation)
and transportation service businesses (Manufacturers Railway Co. and St.
Louis Refrigerator Car Co.).
FAMILY ENTERTAINMENT
The Company is active in the family entertainment field, primarily
through its wholly-owned subsidiary, Busch Entertainment Corporation
("BEC"), which currently owns, directly and through subsidiaries, nine
theme parks.
BEC operates Busch Gardens theme parks in Tampa, Florida and
Williamsburg, Virginia, and Sea World theme parks in Orlando, Florida, San
Antonio, Texas, Aurora, Ohio, and San Diego, California. BEC also operates
water park attractions in Tampa, Florida (Adventure Island) and
Williamsburg, Virginia (Water Country, U.S.A.), an educational play park
for children near Philadelphia, Pennsylvania (Sesame Place), and the
Baseball City Sports Complex near Orlando, Florida. Due to the seasonality
of the theme park business, BEC experiences higher revenues in the second
and third quarters than in the first and fourth quarters.
Through a Spanish affiliate, the Company also owns a 19.9% equity
interest in Port Aventura, S.A., which is a theme park near Barcelona,
Spain.
The Company faces competition in the family entertainment field from
other theme and amusement parks, public zoos, public parks, and other
family entertainment events and attractions.
Through its wholly-owned subsidiary, Busch Properties, Inc. ("BPI"),
the Company is engaged in the business of real estate development. BPI also
owns and operates a resort and conference center in Williamsburg, Virginia
(Kingsmill).
SOURCES AND AVAILABILITY OF RAW MATERIALS
The products manufactured by the Company require a large volume of
various agricultural products, including barley for malt; hops, malt, rice,
and corn grits for beer; and rice for the rice milling and processing
operations of BARI. The Company fulfills its commodities requirements
through purchases from various sources, including purchases from its
subsidiaries, through contractual arrangements, and through purchases on
the open market. The Company believes that adequate supplies of the
aforementioned agricultural products are available at the present time, but
cannot predict future availability or prices of such products and
materials. The commodity markets have experienced and will continue
to experience major price fluctuations. The price and supply of raw
materials will be determined by, among other factors, the level of crop
production, weather conditions, export demand, and government regulations
and legislation affecting agriculture. The Company requires aluminum can
sheet for manufacture of cans and lids. Can sheet prices are impacted by
supply and demand for aluminum ingot and fabrication.
ENERGY MATTERS
The Company uses natural gas, fuel oil, and coal as its primary fuel
materials. Supplies of fuels in quantities sufficient to meet ABI's total
requirements are expected to be available on a year-round basis during
1998. The supply of natural gas, fuel oil, and coal is normally covered by
yearly contracts and no difficulty has been experienced in entering into
these contracts. The cost of fuel used by ABI increased in 1997 and is
expected to be at comparable levels in 1998. Based upon information
presently available, there can be no assurance that adequate supplies of
fuel
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will always be available to the Company and, should such supplies not be
available, the Company's sales and earnings would be adversely affected.
BRAND NAMES AND TRADEMARKS
Some of the Company's major brand names used in its principal business
segments are mentioned in the discussion above. The Company regards
consumer recognition of and loyalty to all of its brand names and
trademarks as extremely important to the long-term success of its principal
business segments.
RESEARCH AND DEVELOPMENT
The Company is involved in a number of research activities relating to
the development of new products or services or the improvement of existing
products or services. The dollar amounts expended by the Company during the
past three years on such research activities and the number of employees
engaged full time therein during such period, however, are not considered
to be material in relation to the total business of the Company.
ENVIRONMENTAL PROTECTION
All of the Company's plants are subject to federal, state, and local
environmental protection laws and regulations, and the Company is operating
within existing laws and regulations or is taking action aimed at assuring
compliance therewith. Various proactive strategies are utilized to help
assure this compliance. Compliance with such laws and regulations is not
expected to materially affect the Company's capital expenditures, earnings,
or competitive position. The Company has devoted considerable effort to
research, development and engineering of cost effective innovative systems
to minimize effects on the environment from its operating facilities. A
major portion of pollution prevention and pollution control expenditures in
1997 and projected for 1998 was or will be justified on the basis of cost
reduction.
These projects, coupled with the Company's environmental management
system and an overall Company emphasis on pollution prevention and resource
conservation initiatives, are improving efficiencies and creating saleable
by-products from residuals and have generally resulted in low cost
operating systems while reducing impact on the air, water, and land
environments.
ENVIRONMENTAL PACKAGING LAWS AND REGULATIONS
The states of California, Connecticut, Delaware, Iowa, Maine,
Massachusetts, Michigan, New York, Oregon, and Vermont have adopted certain
restrictive packaging laws and regulations for beverages that require
deposits on packages. ABI continues to do business in these states. Such
laws have not had a significant effect on ABI's sales, but have had a
significant adverse impact on beer industry growth and are considered by
the Company to be inflationary, costly, and inefficient for recycling
packaging materials. Congress and a number of additional states continue to
consider similar legislation, the adoption of which by Congress or a
substantial number of states or additional local jurisdictions might
require the Company to incur significant capital expenditures.
NUMBER OF EMPLOYEES
As of December 31, 1997, the Company had 24,326 employees.
As of December 31, 1997, approximately 8,705 employees were represented
by the International Brotherhood of Teamsters. Seventeen other unions
represented approximately 1,511 employees. The current labor agreement
between ABI and the Brewery and Soft Drink Workers Conference of the
International Brotherhood of Teamsters, which represents the majority of
brewery workers, was scheduled to expire on February 28, 1998; it has been
extended to March 29, 1998 while the parties continue to negotiate a new
agreement.
The Company considers its employee relations to be good.
ITEM 2. PROPERTIES
ABI has twelve breweries in operation at the present time, located in
St. Louis, Missouri; Newark, New Jersey; Los Angeles and Fairfield,
California; Jacksonville, Florida; Houston, Texas; Columbus, Ohio;
Merrimack, New
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Hampshire; Williamsburg, Virginia; Baldwinsville, New York; Fort Collins,
Colorado; and Cartersville, Georgia. Title to the Baldwinsville, New York
brewery is held by the Onondaga County Industrial Development Agency
("OCIDA") pursuant to a Sale and Agency Agreement with ABI, which enabled
OCIDA to issue tax exempt pollution control and industrial development
revenue notes and bonds to finance a portion of the cost of the purchase
and modification of the brewery. The brewery is not pledged or mortgaged to
secure any of the notes or bonds, and the Sale and Agency Agreement with
OCIDA gives ABI the unconditional right to require at any time that title
to the brewery be transferred to ABI. ABI's breweries operated at
approximately 97% of capacity in 1997; during the peak selling periods
(second and third quarters), they operated at maximum capacity. The Company
also owns an 86.6% equity interest in a joint venture that owns and
operates a brewery in Wuhan, China. The Company also operates the Stag
Brewery near London, England.
The Company, through wholly-owned subsidiaries, operates malt plants in
Manitowoc, Wisconsin, Moorhead, Minnesota, and Idaho Falls, Idaho; rice
mills in Jonesboro, Arkansas and Woodland, California; a wild rice
processing facility in Clearbrook, Minnesota; can manufacturing plants in
Jacksonville, Florida, Columbus, Ohio, Arnold, Missouri, Windsor, Colorado,
Newburgh, New York, Ft. Atkinson, Wisconsin, Rome, Georgia, and Mira Loma,
California; and can lid manufacturing plants in Gainesville, Florida,
Oklahoma City, Oklahoma, and Riverside, California.
BEC operates its principal family entertainment facilities in Tampa,
Florida; Williamsburg, Virginia; San Diego, California; Aurora, Ohio;
Orlando, Florida; and San Antonio, Texas. The Tampa facility is 265 acres,
Williamsburg is 364 acres, San Diego is 165 acres, Aurora is 90 acres,
Orlando is 224 acres, and the San Antonio facility is 496 acres.
Except for the Baldwinsville brewery, the can manufacturing plants in
Newburgh, New York and Rome, Georgia, the Sea World park in San Diego,
California, the Stag Brewery, and the brewery in Wuhan, China, all of the
Company's principal properties are owned in fee. The lease for the land
used by the Sea World park in San Diego, California expires in 2033. The
Company leases the Stag Brewery from Scottish Courage, Ltd. The joint
venture that operates the brewery in Wuhan was granted the right to use the
property for a period of 50 years from the appropriate governmental
authorities. The Company also leases a bottling line at its brewery in
Cartersville, Georgia. The Company considers its buildings, improvements,
and equipment to be well maintained and in good condition, irrespective of
dates of initial construction, and adequate to meet the operating demands
placed upon them. The production capacity of each of the manufacturing
facilities is adequate for current needs and, except as described
above, substantially all of each facility's capacity is utilized.
ITEM 3. LEGAL PROCEEDINGS
In connection with its initial investment in Grupo Modelo and its
operating subsidiary, Diblo, the Company acquired options to purchase
additional interests in Grupo Modelo and Diblo from trusts for the benefit
of certain shareholders of Grupo Modelo and Diblo (the "Controlling
Shareholders"), including the wife of Carlos Fernandez G., a director of
the Company, and other members of his family, and entered into an
investment agreement with Grupo Modelo, Diblo, and the Controlling
Shareholders. In May 1997, the Company acquired an additional 25%
interest in Grupo Modelo, providing it with a 37% direct and indirect
interest in Diblo. The Company has exercised its remaining option to
purchase an additional 13.25% share in Diblo, which will provide it with an
aggregate 50.2% direct and indirect interest in Diblo. The Company and the
Controlling Shareholders are pursuing arbitration to resolve a dispute
concerning the purchase price of the option shares, using procedures
specified by the investment agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth quarter ended
December 31, 1997.
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EXECUTIVE OFFICERS OF THE REGISTRANT
AUGUST A. BUSCH III (age 60) is presently Chairman of the Board and
President, and a Director of the Company and has served in such capacities
since 1977, 1974, and 1963, respectively. Since 1979 he has also served as
Chairman of the Board and Chief Executive Officer of the Company's
subsidiary, Anheuser-Busch, Incorporated.
PATRICK T. STOKES (age 55) is presently Vice President and Group
Executive of the Company and has served in such capacity since 1981. He is
also presently President of the Company's subsidiary, Anheuser-Busch,
Incorporated, and has served in such capacity since 1990.
JOHN H. PURNELL (age 56) is presently Vice President and Group
Executive of the Company and has served in such capacity since 1991. He is
also Chairman of the Board and Chief Executive Officer of the Company's
subsidiary, Anheuser-Busch International, Inc., and has served as Chairman
since 1980 and as Chief Executive Officer since 1991.
W. RANDOLPH BAKER (age 51) is presently Vice President and Chief
Financial Officer of the Company and has served in such capacity since
1996. He previously served as Vice President and Group Executive of the
Company (1982-1996).
STEPHEN K. LAMBRIGHT (age 55) is presently Group Vice President and
General Counsel of the Company and has served in such capacity since
November 1997. He previously served as Vice President and Group Executive
of the Company (1984-November 1997).
ALOYS H. LITTEKEN (age 57) is presently Vice President-Corporate
Engineering of the Company and has served in such capacity since 1981.
WILLIAM L. RAMMES (age 56) is presently Vice President-Corporate Human
Resources of the Company and has served in such capacity since 1992. He is
also Chairman of the Board and President of the Company's subsidiary, Busch
Properties, Inc., and has served in such capacities since 1995.
JOHN B. ROBERTS (age 53) is presently Chairman of the Board and
President of the Company's subsidiary, Busch Entertainment Corporation, and
has served in such capacities since June 1992 and May 1991, respectively.
JOSEPH L. GOLTZMAN (age 56) is presently Vice President and Group
Executive of the Company and has served in such capacity since 1993. He is
also presently Chairman, Chief Executive Officer and President of the
Company's subsidiary, Anheuser-Busch Recycling Corporation, Chairman (since
1995), President and Chief Executive Officer of the Company's subsidiary,
Metal Container Corporation, and Chairman of the Company's indirect
subsidiary, Precision Printing and Packaging, Inc., (since 1993). During
the past five years, he also served as Vice President-Recycling and Metals
Planning (1992-1993) of the Company.
DONALD W. KLOTH (age 56) is presently Vice President and Group
Executive of the Company and has served in such capacity since 1994. He is
also Chairman of the Board and Chief Executive Officer of the Company's
subsidiary, Busch Agricultural Resources, Inc., and has served in such
capacity since 1994. During the past five years, he also served as Vice
President-Materials Acquisition of the Company (1983-1994) and President of
Busch Agricultural Resources, Inc. (1983-1994).
JOHN E. JACOB (age 63) is presently Executive Vice President and Chief
Communications Officer, and a Director of the Company and has served in
such capacities since 1994 and 1990, respectively. He also served as
President and Chief Executive Officer of the National Urban League, Inc.
(1982-1994).
GERHARDT A. KRAEMER (age 65) is presently Senior Vice President-World
Brewing and Technology and has served in such capacity since 1996. During
the past five years, he also served as Vice President-Brewing of the
Company's subsidiary, Anheuser-Busch, Incorporated (1985-1996).
THOMAS W. SANTEL (age 39) is presently Vice President-Corporate
Development of the Company and has served in such capacity since 1996.
During the past five years, he also served as Director of Corporate
Development (1994-May 1996) and Associate Director, Corporate Development
(1993-May 1994).
7
<PAGE> 9
PART II
The information required by Items 5, 6, 7, and 8 of this Part II are
hereby incorporated by reference from pages 34 through 77 of the Company's
1997 Annual Report to Shareholders.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Price Waterhouse LLP, the
Company's independent accountants since 1961, on accounting principles or
practices or financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to Directors is
hereby incorporated by reference from pages 4 through 6 of the Company's
Proxy Statement for the Annual Meeting of Shareholders on April 22, 1998.
The information required by this Item with respect to Executive Officers is
presented on page 7 of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by
reference from page 8 and pages 14 through 21 of the Company's Proxy
Statement for the Annual Meeting of Shareholders on April 22, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by
reference from pages 3 and 7 of the Company's Proxy Statement for the
Annual Meeting of Shareholders on April 22, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by
reference from pages 21 through 23 of the Company's Proxy Statement for the
Annual Meeting of Shareholders on April 22, 1998.
8
<PAGE> 10
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
<TABLE>
<CAPTION>
1. FINANCIAL STATEMENTS: PAGE
----
<S> <C> <C>
Consolidated Balance Sheet at December 31, 1997 and 1996 50<F*>
Consolidated Statement of Income for the three years ended
December 31, 1997 51<F*>
Consolidated Statement of Changes in Shareholders Equity for
the three years ended December 31, 1997 52<F*>
Consolidated Statement of Cash Flows for the three years
ended December 31, 1997 53<F*>
Notes to Consolidated Financial Statements 54- 73<F*>
Report of Independent Accountants 49<F*>
<FN>
<F*>Incorporated herein by reference from the indicated pages of the 1997
Annual Report to Shareholders.
<CAPTION>
2. FINANCIAL STATEMENT SCHEDULE:
<S> <C> <C>
Report of Independent Accountants on Financial Statement Schedule F-1
For the three years ended December 31, 1997:
Schedule VIII--Valuation and Qualifying Accounts and Reserves F-2
<CAPTION>
3. EXHIBITS:
<S> <C>
Exhibit 3.1 -- Restated Certificate of Incorporation with amendments.
(Incorporated by reference to Exhibit 3.1 to Form 10-K
for the fiscal year ended December 31, 1994.)
Exhibit 3.2 -- By-Laws of the Company (as amended and restated October
27, 1993). (Incorporated by reference to Exhibit 3 to
Form 10-Q for the quarter ended September 30, 1993.)
Exhibit 4.1 -- Form of Rights Agreement, dated as of October 26, 1994
between Anheuser-Busch Companies, Inc. and Boatmen's
Trust Company. (Incorporated by reference to Exhibit 4 to
Form 8-K filed November 7, 1994.)
Exhibit 4.2 -- Indenture dated as of August 1, 1995 between the Company
and The Chase Manhattan Bank, as Trustee (Incorporated by
reference to Exhibit 4.1 in the Form S-3 of the
Company, Registration Statement No. 33-60885.) (Other
indentures are not filed, but the Company agrees to
furnish copies of such instruments to the Securities
and Exchange Commission upon request.)
Exhibit 10.1 -- Anheuser-Busch Companies, Inc. Deferred Compensation Plan
for Non-Employee Directors (Amended and Restated as of
January 1, 1997.) (Incorporated by reference to Exhibit
10.1 to Form 10-K for the fiscal year ended December 31,
1996.)<F*>
Exhibit 10.2 -- Anheuser-Busch Companies, Inc. Non-Employee Director
Elective Stock Acquisition Plan effective January 1,
1996. (Incorporated by reference to Exhibit 10.6 to
Form 10-K for the fiscal year ended December 31,
1995.)<F*>
Exhibit 10.3 -- Anheuser-Busch Companies, Inc. 1981 Incentive Stock
Option/Non-Qualified Stock Option Plan (As amended
December 18, 1985, December 16, 1987, December 20, 1988,
July 22, 1992, September 22, 1993, December 20, 1995, and
November 26, 1997.)<F*>
9
<PAGE> 11
Exhibit 10.4 -- Anheuser-Busch Companies, Inc. 1981 Non-Qualified Stock
Option Plan (As amended December 18, 1985, June 24, 1987,
December 20, 1988, July 22, 1992, December 20, 1995, and
November 26, 1997.)<F*>
Exhibit 10.5 -- Anheuser-Busch Companies, Inc. 1989 Incentive Stock Plan
(As amended December 20, 1989, December 19, 1990,
December 15, 1993, December 20, 1995, and November 26,
1997.)<F*>
Exhibit 10.6 -- Anheuser-Busch Companies, Inc. Excess Benefit Plan
amended and restated effective as of October 1, 1993.
(Incorporated by reference to Exhibit 10.9 to Form 10-K
for the fiscal year ended December 31, 1994.)<F*>
Exhibit 10.7 -- Anheuser-Busch Companies, Inc. Supplemental Executive
Retirement Plan amended and restated as of October 1,
1993. (Incorporated by reference to Exhibit 10.10
to Form 10-K for the fiscal year ended December 31,
1994.)<F*>
Exhibit 10.8 -- First Amendment to the Anheuser-Busch Companies, Inc.
Supplemental Executive Retirement Plan as amended and
restated October 1, 1993 effective as of December 14,
1994. (Incorporated by reference to Exhibit 10.11 to Form
10-K for the fiscal year ended December 31, 1994.)<F*>
Exhibit 10.9 -- Second Amendment to the Anheuser-Busch Companies, Inc.
Supplemental Executive Retirement Plan as amended and
restated October 1, 1993 effective as of January 1,
1996. (Incorporated by reference to Exhibit 10.13 to Form
10-K for the fiscal year ended December 31, 1995).<F*>
Exhibit 10.10-- Third Amendment to the Anheuser-Busch Companies, Inc.
Supplemental Executive Retirement Plan as amended and
restated October 1, 1993, effective as of July 1, 1996.<F*>
Exhibit 10.11-- Anheuser-Busch Executive Deferred Compensation Plan
effective January 1, 1994. (Incorporated by reference to
Exhibit 10.16 to Form 10-K for the fiscal year ended
December 31, 1993.)<F*>
Exhibit 10.12-- First Amendment to Anheuser-Busch Executive Deferred
Compensation Plan effective April 1, 1994. (Incorporated
by reference to Exhibit 10.13 to Form 10-K for the
fiscal year ended December 31, 1994.)<F*>
Exhibit 10.13-- Anheuser-Busch 401(k) Restoration Plan effective January
1, 1994 (true and correct as of February 6, 1995).
(Incorporated by reference to Exhibit 10.14 to Form 10-K
for the fiscal year ended December 31, 1994.)<F*>
Exhibit 10.14-- Form of Indemnification Agreement with Directors and
Executive Officers. (Incorporated by reference to Exhibit
10.18 to Form 10-K for the fiscal year ended December 31,
1993.)<F*>
Exhibit 10.15-- Anheuser-Busch Officer Bonus Plan effective January 1,
1995. (Incorporated by reference to Exhibit A to the
Definitive Proxy Statement for Annual Meeting of
Shareholders on April 26, 1995.)<F*>
Exhibit 10.16-- Investment Agreement By and Among Anheuser-Busch
Companies, Inc., Anheuser-Busch International, Inc. and
Anheuser-Busch International Holdings, Inc. and Grupo
Modelo, S.A. de C.V., Diblo, S.A. de C.V. and certain
shareholders thereof, dated as of June 16, 1993.
(Incorporated by reference to Exhibit 10.19 to Form 10-K
for the fiscal year ended December 31, 1993.)
10
<PAGE> 12
Exhibit 10.17-- Letter agreement between Anheuser-Busch Companies, Inc.
and the Controlling Shareholders regarding Section 5.5 of
the Investment Agreement filed as Exhibit 10.16 of this
report. (Incorporated by reference to Exhibit 10.20 to
Form 10-K for the fiscal year ended December 31, 1993.)
Exhibit 12 -- Ratio of Earnings to Fixed Charges.
Exhibit 13 -- Pages 34 through 77 of the Anheuser-Busch Companies, Inc.
1997 Annual Report to Shareholders, a copy of which is
furnished for the information of the Securities and
Exchange Commission. Portions of the Annual Report not
incorporated herein by reference are not deemed "filed"
with the Commission.
Exhibit 21 -- Subsidiaries of the Company
Exhibit 23 -- Consent of Independent Accountants, filed as page F-1 of
this report.
Exhibit 27 -- Financial Data Schedule
<FN>
- --------
<F*> A management contract or compensatory plan or arrangement required to be
filed by Item 14(c) of this report.
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter of
1997.
11
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By AUGUST A. BUSCH III
--------------------------------------
August A. Busch III
Chairman of the
Board and President
Date: March 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
AUGUST A. BUSCH III Chairman of the Board and March 25, 1998
- ------------------------- President and Director (Prinicpal
(August A. Busch III) Executive Officer)
W. RANDOLPH BAKER Vice President and Chief Financial March 25, 1998
- ------------------------- Officer (Principal Financial
(W. Randolph Baker) Officer)
JOHN F. KELLY Vice President and Controller March 25, 1998
- ------------------------- (Principal Accounting Officer)
(John F. Kelly)
BERNARD A. EDISON Director March 25, 1998
- -------------------------
(Bernard A. Edison)
CARLOS FERNANDEZ G. Director March 25, 1998
- -------------------------
(Carlos Fernandez G.)
PETER M. FLANIGAN Director March 25, 1998
- -------------------------
(Peter M. Flanigan)
JOHN E. JACOB Director March 25, 1998
- -------------------------
(John E. Jacob)
CHARLES F. KNIGHT Director March 25, 1998
- -------------------------
(Charles F. Knight)
VERNON R. LOUCKS, JR. Director March 25, 1998
- -------------------------
(Vernon R. Loucks, Jr.)
12
<PAGE> 14
VILMA S. MARTINEZ Director March 25, 1998
- -------------------------
(Vilma S. Martinez)
SYBIL C. MOBLEY Director March 25, 1998
- -------------------------
(Sybil C. Mobley)
JAMES B. ORTHWEIN Director March 25, 1998
- -------------------------
(James B. Orthwein)
WILLIAM PORTER PAYNE Director March 25, 1998
- -------------------------
(William Porter Payne)
ANDREW C. TAYLOR Director March 25, 1998
- -------------------------
(Andrew C. Taylor)
DOUGLAS A. WARNER III Director March 25, 1998
- -------------------------
(Douglas A. Warner III)
WILLIAM H. WEBSTER Director March 25, 1998
- -------------------------
(William H. Webster)
EDWARD E. WHITACRE, JR. Director March 25, 1998
- -------------------------
(Edward E. Whitacre, Jr.)
</TABLE>
13
<PAGE> 15
<TABLE>
ANHEUSER-BUSCH COMPANIES, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULE
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on Financial Statement Schedule... F-1
Consent of Independent Accountants.................................. F-1
Financial Statement Schedule for the Years 1997, 1996 and 1995:
Valuation and Qualifying Accounts and Reserves (Schedule VIII).... F-2
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or
Notes thereto.
Separate financial statements of subsidiaries not consolidated have been
omitted because, in the aggregate, the proportionate shares of their profit
before income taxes and total assets are less than 20% of the respective
consolidated amounts, and investments in such companies are less than 20% of
consolidated total assets.
14
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
of Anheuser-Busch Companies, Inc.
Our audits of the Consolidated Financial Statements referred to in our report
dated February 3, 1998 appearing on page 49 of the 1997 Annual Report to
Shareholders of Anheuser-Busch Companies, Inc. (which report and Consolidated
Financial Statements are incorporated by reference in this Annual Report on
Form 10-K) also included an audit of the Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, the Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related Consolidated Financial
Statements.
PRICE WATERHOUSE LLP
St. Louis, Missouri
February 3, 1998
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-119209)
and in the Registration Statements on Forms S-8 (No. 2-77829, No. 33-4664,
No. 33-36132, No. 33-39714, No. 33-39715, No. 33-46846, No. 33-53333, No.
33-58221, and No. 33-58241) of Anheuser-Busch Companies, Inc. of our report
dated February 3, 1998 appearing on page 49 of the Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We
also consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page F-1 of this Form 10-K.
PRICE WATERHOUSE LLP
St. Louis, Missouri
March 25, 1998
F-1
<PAGE> 17
<TABLE>
ANHEUSER-BUSCH COMPANIES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(CONTINUING OPERATIONS BASIS, IN MILLIONS)
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Reserve for doubtful accounts (deducted from
related assets):
Balance at beginning of period............ $ 3.1 $ 1.9 $ 1.9
Additions charged to costs and expenses... 2.0 1.8 .9
Additions (recoveries of uncollectible
accounts previously written off)........ .1 .4 .4
Deductions (uncollectible accounts
written off)............................ (.3) (1.0) (1.3)
------ ------ ------
Balance at end of period.................. $ 4.9 $ 3.1 $ 1.9
====== ====== ======
Deferred income tax asset valuation allowance
under FAS 109:
Balance at beginning of period............. $ 81.7 $ 66.7 $ 52.7
Additions to valuation allowance charged
to costs and expenses.................... 13.2 16.6 15.7
Deductions from valuation allowance
(utilizations and expirations)........... (2.4) (1.6) (1.7)
------ ------ ------
Balance at end of period................... $ 92.5 $ 81.7 $ 66.7
====== ====== ======
</TABLE>
F-2
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Exhibit
- ----------- -------
Exhibit 10.3 Anheuser-Busch Companies, Inc. 1981 Incentive Stock
Option/Non-Qualified Stock Option Plan (As amended
December 18, 1985, December 16, 1987, December 20, 1988,
July 22, 1992, September 22, 1993, December 20, 1995, and
November 26, 1997.)<F*>
Exhibit 10.4 Anheuser-Busch Companies, Inc. 1981 Non-Qualified Stock
Option Plan (As amended December 18, 1985, June 24, 1987,
December 20, 1988, July 22, 1992, December 20, 1995, and
November 26, 1997.)<F*>
Exhibit 10.5 Anheuser-Busch Companies, Inc. 1989 Incentive Stock Plan
(As amended December 20, 1989, December 19, 1990,
December 15, 1993, December 20, 1995, and November 26,
1997.)<F*>
Exhibit 10.10 Third Amendment to the Anheuser-Busch Companies, Inc.
Supplemental Executive Retirement Plan as amended and
restated October 1, 1993, effective as of July 1, 1996.<F*>
Exhibit 12 Ratio of Earnings to Fixed Charges.
Exhibit 13 Pages 34 through 77 of the Anheuser-Busch Companies, Inc.
1997 Annual Report to Shareholders, a copy of which is
furnished for the information of the Securities and
Exchange Commission. Portions of the Annual Report not
incorporated herein by reference are not deemed "filed"
with the Commission.
Exhibit 21 Subsidiaries of the Company
Exhibit 27 Financial Data Schedule
<PAGE> 1
EX-10.3
ANHEUSER-BUSCH COMPANIES, INC.
1981 INCENTIVE STOCK OPTION/NON-QUALIFIED STOCK OPTION PLAN
(As amended December 18, 1985, December 16, 1987,
December 20, 1988, July 22, 1992, September 22, 1993,
December 20, 1995, and November 26, 1997)
Section 1. Establishment and Purpose.
-------------------------
Anheuser-Busch Companies, Inc. hereby establishes a stock
option plan to be named the Anheuser-Busch Companies, Inc. 1981
Incentive Stock Option/Non-Qualified Stock Option Plan (the
"Plan"), for officers and key employees of the Company and its
subsidiaries. The purpose of the Plan is (1) to induce officers
and key employees of the Company and its subsidiaries who are in
a position to contribute materially to the prosperity thereof to
remain with the Company or its subsidiaries, to offer them
incentives and rewards in recognition of their contributions to
the Company's progress, and to encourage them to continue to
promote the best interests of the Company and its subsidiaries,
and (2) to aid the Company and its subsidiaries in competing with
other enterprises for the services of new officers and key
personnel needed to help insure the Company's continued progress.
Section 2. Definitions.
-----------
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Code" means the Internal Revenue Code as in effect from
time to time.
(c) "Committee" means the Stock Option Committee provided
for in Section 3 hereof.
(d) "Company" means Anheuser-Busch Companies, Inc., a
corporation organized and existing under the laws of the State of
Delaware.
(e) "Fair Market Value", for all purposes hereunder, shall
be the mean between the highest and lowest selling prices of the
Company's common stock on the New York Stock Exchange Composite
Tape on the appropriate valuation date.
(f) "Incentive Stock Option" means an option to purchase
Stock granted pursuant to the Plan which is designated by the
Committee as an Incentive Stock Option and which is intended to
qualify as an "incentive stock option" under Section 422A of the
Code.
(g) "Non-Qualified Stock Option" means an option to purchase
Stock granted pursuant to the Plan which is designated by the
Committee as a Non-Qualified Stock Option or an Option which is
treated as a Non-Qualified Stock Option under Section 6(b).
<PAGE> 2
(h) "Option" means an Incentive Stock Option or a
Non-Qualified Stock Option.
(i) "Optionee" means the person to whom an Option is
granted.
(j) "Option Agreement" means an Incentive Stock Option
Agreement or a Non-Qualified Stock Option Agreement, as
applicable. The terms "Incentive Stock Option Agreement" and
"Non-Qualified Stock Option Agreement" have the meanings given
them in Section 7.
(k) "Plan" means the Anheuser-Busch Companies, Inc. 1981
Incentive Stock Option/Non-Qualified Stock Option Plan.
(l) "Post-Death Representative(s)" means the executor(s) or
administrator(s) of the Optionee's estate or the person or
persons to whom the Optionee's rights under his or her Option
pass by Optionee's will or the laws of descent and distribution.
(m) "Stock" means authorized and unissued shares of common
stock of the Company or reacquired shares of the Company's common
stock held in its Treasury.
(n) "Subsidiary" means a "subsidiary corporation" as defined
in Section 425 of the Code.
(o) "Ten Per Cent Shareholder" means any individual who at
the time an Option is granted owns directly or indirectly stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any subsidiary, taking
into account the provisions of Section 425(d) of the Code.
(p) "Transferee Corporation" means a corporation, or a
parent or subsidiary corporation of such corporation, issuing or
assuming an Option granted hereunder in a transaction to which
Section 425(a) of the Code applies.
(q) Generally, terms used herein shall have the meanings
which they have under Section 422A of the Code and Regulations
thereunder.
Section 3. Administration. The Plan shall be administered by
--------------
a Stock Option Committee consisting of three or more persons who
shall be members of the Board of Directors and who shall not be
eligible to receive Options under the Plan. The Board of
Directors shall appoint the members of the Committee and its
Chairman and may fill vacancies thereon, however caused. The
Committee shall hold its meetings at such times and places as it
may determine. A majority of the members of the Committee shall
constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the members of the
Committee, shall be deemed the acts of the Committee. The
Company shall grant Options under the Plan in accordance with
determinations made by the Committee pursuant to the provisions
of the Plan. The Committee may from time to time adopt (and
thereafter may from time to time amend and rescind) such
administrative rules and regulations for carrying out the Plan,
and the Committee may take such action in the administration of
2
<PAGE> 3
the Plan, not inconsistent with the provisions hereof, as it
shall deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless otherwise
determined by the Board of Directors of the Company, be final and
conclusive.
Section 4. Total Number of Shares of Stock Subject to the Plan.
---------------------------------------------------
The maximum number of shares of Stock which may be issued
pursuant to Options granted hereunder (subject to adjustment as
provided in Section 12 hereof) shall be 37,800,000 shares.
Accordingly, 37,800,000 shares of the authorized but unissued
common stock, par value $1.00 per share, of the Company shall be
reserved for issuance upon the exercise of Options granted under
the Plan. The Company may in its discretion use reacquired
shares held in the Treasury in lieu of authorized but unissued
shares. If an Option shall terminate for any reason without
having been exercised in full, the shares previously subject to
such Option shall, unless the period during which Options under
the Plan may be granted has expired, again be available for the
purposes of the Plan and such terminated Option or any portion
thereof shall not be taken into account in computing the total
number of shares theretofore optioned.
Section 5. Eligibility.
-----------
The class of employees eligible to receive Options under the
Plan shall be officers and key employees of the Company or of any
parent or subsidiary thereof (not including directors of the
Company or of any parent or subsidiary thereof who are not
otherwise officers or employees of the Company or of any parent
or subsidiary thereof).
Section 6. Granting of Options.
-------------------
(a) The Committee shall, in its discretion, determine the
officers and key employees to be granted Options, the time or
times at which Options shall be granted, the number of shares
subject to each Option, and whether an Option shall be an
Incentive Stock Option or a Non-Qualified Stock Option. In
making such determination, the Committee may take into
consideration the value of the services rendered by the
respective individuals, their present and potential contributions
to the success of the Company and any parent or subsidiary, and
other factors which the Committee may deem relevant in
accomplishing the purpose of the Plan. Options granted under the
Plan shall not be affected by any change of duties or position of
the Optionee so long as the Optionee continues to be an employee
of the Company or of any parent or subsidiary thereof. An
individual may be granted more than one Option. Notwithstanding
3
<PAGE> 4
any other provisions of the Plan, the aggregate Fair Market Value
(determined as of the time the Option is granted) of the Stock
for which any employee may be granted Options in any calendar
year (under this Plan and all other plans of his employer
corporation and its parent and subsidiary corporations providing
for the issuance of "incentive stock options" within the meaning
of Section 422A of the Code) shall not exceed $100,000 plus any
unused limit carryover to such year permitted by said Section
422A, as in effect immediately prior to the effective date of the
amendments to said Section 422A by the Tax Reform Act of 1986.
(b) To the extent that the aggregate Fair Market Value of
Stock with respect to which Incentive Stock Options (determined
without regard to this subsection (b)) which are granted after
December 31, 1986 are exercisable for the first time by an
Optionee during any calendar year (under all plans of the
Optionee's employer corporation and its parent and subsidiary
corporations) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options. For purposes of this
subsection (b), Options shall be taken into account in the order
in which they are granted and the Fair Market Value of the Stock
shall be determined as of the time the Option is granted.
Section 7. Terms of Options.
----------------
The Committee, in its sole discretion, shall determine on and
after what date or dates Options granted hereunder shall be
exercisable and whether any particular Option shall become
exercisable in one or more installments, specifying the
installment dates and the number of shares exercisable on and
after each such date, and, within the limits herein provided,
shall determine the total period during which such Option is
exercisable. The Committee may, in its sole discretion, after
an Option is granted, accelerate the date or dates on which such
Option is exercisable. Further, regarding Non-Qualified Stock
Options, the Committee may include any other provisions which are
consistent with the Plan; regarding Incentive Stock Options, the
Committee may include any other provisions which are consistent
with both the Plan and Section 422A of the Code, or which are
necessary to qualify the Option's grant under the provisions of
Section 422A of the Code.
If while unexercised Options remain outstanding under the
Plan (i) any corporation (other than the Company), person or
group (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) makes a
tender or exchange offer which, if consummated, would make such
corporation, person or group the beneficial owner (within the
meaning of Rule 13d-3 under the Act) of more than 50% of the
Company's then outstanding Stock and, pursuant to such offer,
4
<PAGE> 5
purchases are made ("Offer"); (ii) the shareholders of the
Company approve a definitive agreement to merge or consolidate
the Company with or into another corporation or to sell or
otherwise dispose of all or substantially all of its assets, or
adopt a plan of liquidation; or (iii) the Company becomes aware
that any person or group (within the meaning of Sections 13(d)
and 14(d)(2) of the Act) has become the beneficial owner (within
the meaning of Rule 13d-3 under the Act) of more than 50% of the
Company's then outstanding Stock, then on the date of the first
purchase of Stock pursuant to such Offer, or the date of any such
shareholder approval or adoption, or the date on which the
Company becomes aware of the acquisition of such percentage of
the Company's Stock (any such date being referred to as an
"Acceleration Date"), each outstanding option shall be
exercisable in full, even though, but for this paragraph, such
Option would not yet be exercisable because an installment date
has not yet occurred.
Notwithstanding any other provision of the Plan, each Option
granted under the Plan shall be evidenced by a written Incentive
Stock Option Agreement or a Non-Qualified Stock Option Agreement,
as applicable, in such form, not inconsistent with the Plan, as
the Committee shall determine, which shall include the substance
of the following terms and conditions:
(a) Each Incentive Stock Option Agreement shall state that
the Option is an "incentive stock option" under Section 422A of
the Code, and each Non-Qualified Stock Option Agreement shall
state that the Option is a Non-Qualified Stock Option.
(b) The option price for each share of Stock covered by such
Option shall be an amount not less than 100% (or, in the case of
an Option granted to a Ten Per Cent Shareholder, not less than
110%) of the Fair Market Value of the Stock on the date the
Option is granted.
(c) The Option by its terms shall not be transferable by the
Optionee otherwise than by will or by the laws of descent and
distribution and shall be exercisable, during his or her
lifetime, only by the Optionee.
(d) The Option by its terms shall not be exercisable after
the expiration of ten years (or, if the Optionee is a Ten Per
Cent Shareholder, five years) from the date such Option is
granted.
(e) The number of shares which are issued pursuant to the
exercise of an Option shall be charged against the maximum
limitation on shares set forth in Section 4.
(f) An Option may be exercised only by the Optionee during
his or her lifetime, and only by the Optionee's Post-Death
Representatives after his or her death. Option Agreements may
5
<PAGE> 6
contain any provision approved by the Committee, not inconsistent
with Sections 7(d), 8, or 9 of the Plan, relating to the period
for exercise of Options after termination of employment, death,
or disability.
(g) An Option granted prior to January 1, 1987 by its terms
shall not be exercisable by the Optionee while there is
outstanding any "incentive stock option" within the meaning of
Section 422A of the Code which was granted before the granting of
such Option to the Optionee to purchase stock in the Company or
in any corporation which (at the time of the granting of such
Option) is a parent or subsidiary of the Company, or is a
predecessor corporation of any such corporation. For purposes of
this subsection 7(g), an Option shall be treated as outstanding
until such Option is exercised in full or expires by reason of
lapse of time.
Section 8. Agreement to Serve.
------------------
Each Optionee shall agree that he or she will remain in the
service of the Company or a parent or subsidiary of the Company
for at least two years from the date of grant to him or her of an
Option, at the pleasure of the Board of Directors and at such
compensation as the Board of Directors or any Committee thereof
shall reasonably determine from time to time. If any Optionee
voluntarily terminates such employment prior to the expiration of
said two year period in violation of the foregoing provisions of
this Section 8, or if at any time the Optionee is dismissed from
such employment for any reason, such Option (and any other Option
or Options held by him or her under the Plan) to the extent not
theretofore exercised shall forthwith terminate. The Committee
may waive, in whole or part and for any reason the Committee
deems appropriate, any termination caused by this Section 8 of
any Option or group of Options.
Section 9. Condition to Exercise of Options.
--------------------------------
(a) The exercise of any Option under the Plan shall be
conditioned on the Optionee at all times during his or her
employment with the Company having continuously satisfied his or
her duties of loyalty and faithful service to the Company and
having refrained from engaging in any undisclosed conflict of
interest or from otherwise acting in any manner inimical to or
contrary to the best interests of the Company. Any violation of
law or of any Company policy or the Business Practices and Ethics
Manual of the Company shall be considered conduct inimical to or
contrary to the best interests of the Company for the purposes of
this Section 9. The exercise of any Option shall be deemed to be
the certification by the Optionee that he has satisfied this
condition. In addition, the Optionee shall furnish to the
Committee on request any other information concerning
satisfaction of such condition which the Committee may request.
6
<PAGE> 7
(b) This Section 9 is intended to establish, as a condition
to the realization of economic benefits under the Plan, a
standard of conduct consistent with (i) the duties of loyalty and
faithful performance of services imposed on an employee by the
common law, and (ii) the Company's published standards and
policies which the Optionee is bound to observe. This Section 9
shall in no way impair or derogate from the rights or remedies
which the Company may have at law or in equity or under any
employment contract or agreement with an Optionee to prevent or
to recover damages for the disclosure of trade secrets, or to
recover any restitution or damages properly owing the Company
because of any theft, fraud, embezzlement, or other illegal
conduct on the part of an Optionee.
(c) If the Committee determines that an Optionee has not
observed the standard of conduct required by this Section 9, the
Committee may require the Optionee to forfeit any right to or in
any unexercised Options as of the date such determination is
made, and may require repayment of any economic benefit received
as a result of the exercise of any Option after the act or acts
of misconduct which gave rise to the Committee's determination.
(d) This Section 9 shall not be interpreted as requiring the
Committee to take action in each and every instance of suspected
misconduct, and in determining to attempt to enforce the
forfeiture and repayment provisions of this Section 9, the
Committee may consider, among other things, the possible economic
effects, the circumstances surrounding the discontinuance of the
Optionee's employment with the Company and the amount of proof
which the Company may have of any alleged misconduct. Any
decision by the Committee to forego enforcement of this Section 9
in whole or in part in any particular instance shall in no way
constitute a waiver of the right to enforce such Section in any
other instance.
(e) During the period of any investigation into whether an
Optionee has engaged in conduct prohibited by this Section 9, the
Optionee's rights to exercise any Option shall be suspended.
Section 10. Exercise of Options.
-------------------
(a) An Optionee may pay the option price of an Option in
cash, Stock (including shares of previously-owned Stock, or Stock
issuable in connection with the Option), or other property, to
the extent permitted or required by the Option Agreement or the
Committee from time to time. The Committee may permit deemed or
constructive transfers of shares in lieu of actual transfer and
physical delivery of certificates. Except to the extent
prohibited by applicable law, the Committee or its delegate may
take any necessary or appropriate steps in order to facilitate
the payment of any such purchase price. Without limiting the
foregoing, the Committee may allow the Optionee to defer payment
of the option price, or may cause the Company to loan the option
7
<PAGE> 8
price to the Optionee or to guaranty that any shares to be issued
will be delivered to a broker or lender in order to allow the
Optionee to borrow the purchase price. The Committee may require
satisfaction of any rules or conditions in connection with paying
the Option price at any particular time, in any particular form,
or with the Company's assistance.
(b) An Optionee shall have none of the rights of a
shareholder with respect to shares of Stock subject to his or her
Option until shares of Stock are issued to him or her upon the
exercise of his or her Option.
(c) When an Optionee's Employer becomes required to collect
Required Withholding Taxes, the Optionee shall promptly pay to
the Company or Employer (as required by the Committee) the amount
of such Required Withholding Taxes in cash, unless the Option
Agreement or the Committee permits or requires payment in another
form. In the discretion of the Committee or its delegate and at
the Optionee's request, the Committee or its delegate may cause
the Company or Employer to pay Withholding Taxes in excess of
Required Withholding Taxes on behalf of an Optionee, which shall
be reimbursed by the Optionee. The Committee may allow an
Optionee to pay or reimburse the Company or Employer with shares
of Stock (other than Restricted Stock granted under the Anheuser-
Busch Companies, Inc. 1989 Incentive Stock Plan) or other
property. The Committee may require the satisfaction of any
rules or conditions in connection with any non-cash payment of
Withholding Taxes. If an Optionee is a Reporting Person at the
time of grant or during an Option's term and is given an election
to pay any Withholding Taxes with Stock, the Committee shall have
the sole discretion to approve or disapprove such election at any
time after the election is made. As used in this subsection:
(i) "Withholding Taxes" means, in connection with
the exercise of an Option, (A) the total amount of
Federal and state income taxes which the Employer of the
Optionee is required to withhold ("Required Withholding
Taxes") plus (B) any other income taxes which the
Employer withholds at the request of the Optionee.
(ii) "Employer" means the Company or Subsidiary
which employs the Optionee.
(iii) "Reporting Person," as of a given date, means
an Optionee who would be required to report an ordinary
purchase or sale of Stock occurring on such date to the
Securities and Exchange Commission pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations
thereunder.
8
<PAGE> 9
Section 11. General Provisions.
------------------
(a) The Company shall not be required to issue or deliver
any certificates for shares of Stock to an Optionee upon the
exercise of his or her Option, prior to
(i) if requested by the Company, the filing with
the Company by the Optionee or the Optionee's Post-Death
Representative of a representation in writing that at the
time of such exercise it is his or her then present
intention to acquire the shares of Stock being purchased
for investment and not for resale, and/or the completion
of any registration or other qualification of such shares
of Stock under any state or Federal laws or rulings or
regulations of any government regulatory body, which the
Company shall determine to be necessary or advisable, and
(ii) the listing, or approval for listing upon
notice of issuance, of such shares of Stock on the New
York Stock Exchange or such other securities exchange as
may at the time be the principal market for the Stock,
and
(iii) the obtaining of any other consent, approval
or permit from any State or Federal governmental agency
which the Committee shall, in its absolute discretion
upon the advice of counsel, determine to be necessary or
advisable.
(b) It is intended that the portion of the Plan relating to
Incentive Stock Options and all Incentive Stock Options granted
hereunder will meet the requirements for "incentive stock
options" within the meaning of Section 422A of the Code as said
Section may be in effect at the time of grant. The Plan shall in
all respects be so interpreted and construed as to be consistent
with this intention. Notwithstanding the foregoing, nothing
shall prohibit an amendment to an Option Agreement with respect
to an Incentive Stock Option which would change its status to a
Non-Qualified Stock Option, so long as the Company and the
Optionee shall consent to such amendment.
Section 12. Adjustments and Acquisitions
----------------------------
In the event of (i) any change in the outstanding shares of
Stock by reason of any stock split, combination of shares, stock
dividend, reorganization, merger, consolidation, or other
corporate change having a similar effect, or (ii) any separation
of the Company including a spin-off or other distribution of
stock or property by the Company, or (iii) any distribution to
stockholders generally other than a normal dividend, the
Committee shall make such equitable adjustments to the Plan and
to outstanding Options as it shall deem appropriate in order to
prevent the dilution or enlargement of the economic value of
9
<PAGE> 10
outstanding Options. Any such determination by the Committee
shall be conclusive and binding on all concerned.
Section 13. Duration, Amendment and Termination.
-----------------------------------
The Board of Directors may at any time terminate the Plan or
make such amendments thereof as it shall deem advisable and in
the best interests of the Company, without further action on the
part of the shareholders of the Company; provided, however, that
no such termination or amendment shall, without the consent of
the Optionee, adversely affect or impair the rights of such
Optionee, and provided further, that, unless the shareholders of
the Company shall have first approved thereof, no amendment of
this Plan shall be made whereby (a) the total number of shares of
Stock which may be optioned under the Plan to all individuals, or
to any of them, shall be increased, except by operation of the
adjustment provisions of Section 12 hereof, (b) the authority to
administer the Plan by a committee consisting of directors of the
Company not eligible to receive Options granted under the Plan
shall be withdrawn, (c) the term of the Options shall be
extended, (d) the minimum option price shall be decreased, or (e)
the class of employees to whom Options may be granted shall be
changed.
The period during which Options may be granted under the Plan
shall terminate on December 21, 1991, unless the Plan shall
therefore have been terminated as hereinabove provided.
Section 14. Shareholder Approval.
--------------------
No Option granted under the Plan may be exercised in whole or
in part until adoption of the Plan is approved by the affirmative
vote of a majority of the outstanding shares of the Company
entitled to vote at a meeting of the shareholders duly called for
the purpose of voting thereon, and unless the Plan is approved by
the shareholders within twelve months of its adoption by the
Board of Directors.
Section 15. Date of Granting of Options.
---------------------------
Nothing contained in the Plan or in any resolution adopted or
to be adopted by the Board of Directors or the shareholders of
the Company shall constitute the granting of any Option
hereunder. The date of grant of an Option pursuant to the Plan
shall be the date of grant thereof by the Committee. Within ten
business days after the date of grant of the Option, the Company
shall notify the Optionee of the grant of the Option, and shall
mail to the Optionee an Option Agreement, duly executed by and on
behalf of the Company, with the request that the Optionee execute
the Option Agreement within thirty days after the date of mailing
by the Company. If the Optionee shall fail to execute the Option
Agreement within said thirty-day period, his or her Option shall
be automatically terminated.
10
<PAGE> 1
Ex-10.4
ANHEUSER-BUSCH COMPANIES, INC.
1981 NON-QUALIFIED STOCK OPTION PLAN
(As amended December 18, 1985, June 24, 1987, December 20, 1988,
July 22, 1992, December 20, 1995, and November 26, 1997)
Section 1. Establishment and Purpose.
-------------------------
Anheuser-Busch Companies, Inc. hereby establishes a
non-qualified stock option plan to be named the Anheuser-Busch
Companies, Inc. 1981 Non-Qualified Stock Option Plan ("Plan"), for
officers and key employees of the Company and its subsidiaries.
The purpose of the Plan is (1) to induce officers and key employees
of the Company and its subsidiaries who are in a position to
contribute materially to the prosperity thereof to remain with the
Company or its subsidiaries, to offer them incentives and rewards
in recognition of their contributions to the Company's progress,
and to encourage them to continue to promote the best interests of
the Company and its subsidiaries, and (2) to aid the Company and
its subsidiaries in competing with other enterprises for the
services of new officers and key personnel needed to help insure
the Company's continued progress.
Section 2. Definitions.
-----------
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Alternative Stock Appreciation Right" means a right,
granted in conjunction with the grant of an Option pursuant to the
Plan, to receive Stock having a value on the date such right is
exercised equal to (i) the excess of the Fair Market Value of one
share of Stock on the date of exercise of the Alternative Stock
Appreciation Right over (ii) the base price for the Right.
(c) "Board of Directors" means the Board of Directors of the
Company.
(d) "Cash Feature" means the feature, granted by the Committee
pursuant to Section 8(a) below in connection with an Alternative
Stock Appreciation Right, allowing the Optionee to receive, in
connection with the exercise of such Right, an amount of cash
determined and paid in accordance with paragraph (c) of Section 8
of the Plan and the rules adopted by the Committee pursuant to
Section 8(e) below.
(e) "Cash Percentage" means that percentage from zero to 100%
determined from time to time by the Committee in accordance with
the rules of the Committee adopted pursuant to Section 8(e) below.
(f) "Code" means the Internal Revenue Code as in effect from
time to time.
<PAGE> 2
(g) "Committee" means the Stock Option Committee provided for
in Section 3 hereof.
(h) "Company" means Anheuser-Busch Companies, Inc., a
corporation organized and existing under the laws of the State of
Delaware.
(i) "Fair Market Value", for all purposes hereunder, shall be
the mean between the highest and lowest selling prices of the
Company's common stock on the New York Stock Exchange Composite
Tape on the appropriate valuation date.
(j) "Option" means a non-ISO stock option, i.e. an option
which is not an "incentive stock option" under Section 422A of the
Code, granted with or without accompanying Alternative Stock
Appreciation Rights to purchase common stock of the Company granted
pursuant to the Plan.
(k) "Optionee" means the person to whom an Option is granted.
(l) "Plan" means the Anheuser-Busch Companies, Inc. 1981
Non-Qualified Stock Option Plan.
(m) "Post-Death Representative(s)" means the executor(s) or
administrator(s) of the Optionee's estate or the person or persons
to whom the Optionee's rights under his or her Option pass by his
or her will or the laws of descent and distribution.
(n) "Reporting Person" means an Optionee who is required to
file statements relating to his or her beneficial ownership of
Stock with the Securities and Exchange Commission pursuant to
Section 16(a) of the Act.
(o) "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Act as amended from
time to time.
(p) "Spread," when used in connection with Alternative Stock
Appreciation Rights having the same base price (as determined under
Section 8(c)(2) below), means (i) the difference obtained by
subtracting the base price of such Rights from the Fair Market
Value of a share of Stock on the date such Rights are exercised,
(ii) multiplied by the number of such Rights being exercised.
(q) "Stock" means authorized and unissued shares of common
stock of the Company or reacquired shares of the Company's common
stock held in its Treasury.
(r) "Subsidiary" means a "subsidiary corporation" as defined
in Section 425 of the Code.
(s) "Transferee Corporation" means a corporation, or a parent
or subsidiary corporation of such corporation, by reason of a
corporate merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, issuing or assuming an
Option granted hereunder in a transaction to which Section 425(a)
of the Code applies.
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<PAGE> 3
(t) "Window Period" means the period as defined from time to
time in paragraphs (e)(3)(iii) and (e)(1)(ii) of Rule 16b-3. At
this time, the term "Window Period" as so defined means the period
beginning on the third business day following the date of release
of the financial data of the Company specified in paragraph
(e)(1)(ii) of Rule 16b-3 and ending on the twelfth business day
following such date. Such financial data includes quarterly and
annual statements of sales and earnings, and the date of its
release is the date such data (A) appears on a wire service, (B)
appears in a financial news service, (C) appears in a newspaper of
general circulation, or (D) is otherwise made publicly available.
In interpreting this definition, the provisions of the first
sentence shall be controlling, the remaining sentences being
included for informational purposes only.
Section 3. Administration.
--------------
The Plan shall be administered by a Stock Option Committee
consisting of three or more persons who shall be members of the
Board of Directors and who shall not be eligible to receive Options
under the Plan. The Board of Directors shall appoint the members
of the Committee and its Chairman and may fill vacancies thereon,
however caused. The Committee shall hold its meetings at such
times and places as it may determine. A majority of the members of
the Committee shall constitute a quorum and the acts of a majority
of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the members of the
Committee, shall be deemed the acts of the Committee. The Company
shall grant Options under the Plan in accordance with
determinations made by the Committee pursuant to the provisions of
the Plan. The Committee may from time to time adopt (and
thereafter may from time to time amend and rescind) such
administrative rules and regulations for carrying out the Plan, and
the Committee may take such action in the administration of the
Plan, not inconsistent with the provisions hereof, as it shall deem
proper. The interpretation and construction of any provisions of
the Plan by the Committee shall, unless otherwise determined by the
Board of Directors of the Company, be final and conclusive.
Section 4. Total Number of Shares of Stock Subject to the Plan.
---------------------------------------------------
The maximum number of shares of Stock which may be issued
pursuant to Options or Alternative Stock Appreciation Rights
granted hereunder (subject to adjustment as provided in Section 13
hereof) shall be 21,800,000 shares. Accordingly, 21,800,000 shares
of the authorized but unissued common stock, par value $1.00 per
share, of the Company shall be reserved for issuance upon the
exercise of Options or Alternative Stock Appreciation Rights
granted under the Plan. The Company may in its discretion use
reacquired shares held in the Treasury in lieu of authorized but
unissued shares. If an Option shall terminate for any reason
without having been exercised in full, the unpurchased shares
thereunder shall, unless the period during which Options under the
Plan may be granted has expired, again be available for the
3
<PAGE> 4
purposes of the Plan and such terminated Option or any portion
thereof shall not be taken into account in computing the total
number of shares theretofore optioned; provided that, if the Option
terminates because of the exercise of Alternative Stock
Appreciation Rights, only the excess of the unpurchased shares over
the shares issued upon exercise of the Alternative Stock
Appreciation Rights shall again be available. Termination of an
Option shall automatically terminate the Alternative Stock
Appreciation Right, if any, granted in conjunction with such
Option, unless termination is caused by the exercise of such
Rights.
Section 5. Eligibility.
-----------
The class of employees eligible to receive Options under the
Plan shall be officers and key employees of the Company or of any
parent or subsidiary thereof (not including directors of the
Company or of any parent or subsidiary thereof who are not
otherwise officers or employees of the Company or of any parent or
subsidiary thereof).
Section 6. Granting of Options.
-------------------
The Committee shall, in its discretion, determine the officers
and key employees to be granted Options, whether the shares covered
by any particular Option shall be accompanied by Alternative Stock
Appreciation Rights, the time or times at which Options shall be
granted, and the number of shares subject to each Option. The
Committee may at any time grant new Options to an individual who
has received Options whether such prior Options are still
outstanding, have previously been exercised in whole or in part, or
are cancelled in connection with the grant of new Options. In
granting Options, the Committee may take into consideration the
value of the services rendered by the respective individuals, their
present and potential contributions to the success of the Company
and its subsidiaries and other factors which the Committee may deem
relevant in accomplishing the purpose of the Plan. Options granted
under the Plan shall not be affected by any change of duties or
position of the Optionee so long as the Optionee continues to be an
employee of the Company or of any parent or subsidiary thereof.
Section 7. Terms of Options.
----------------
The Committee, in its sole discretion, shall determine on and
after what date or dates Options granted hereunder shall be
exercisable and whether any particular Option shall become
exercisable in one or more installments, specifying the installment
dates and the number of shares exercisable on and after each such
date, and, within the limits herein provided, shall determine the
total period during which such Option is exercisable. The
Committee may, in its sole discretion, after an Option is granted,
accelerate the date or dates on which such Option is exercisable.
The Committee may include such other provisions as the Committee
may deem acceptable or desirable.
4
<PAGE> 5
If while unexercised Options remain outstanding under the Plan
(i) any corporation (other than the Company), person or group
(within the meaning of Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Act")) makes a tender or
exchange offer which, if consummated, would make such corporation,
person or group the beneficial owner (within the meaning of Rule
13d-3 under the Act) of more than 50% of the Company's then
outstanding Stock and, pursuant to such offer, purchases are made
("Offer"); (ii) the shareholders of the Company approve a
definitive agreement to merge or consolidate the Company with or
into another corporation or to sell or otherwise dispose of all or
substantially all of its assets, or adopt a plan of liquidation; or
(iii) the Company becomes aware that any person or group (within
the meaning of Sections 13(d) and 14(d)(2) of the Act) has become
the beneficial owner (within the meaning of Rule 13d-3 under the
Act) of more than 50% of the Company's then outstanding Stock, then
on the date of the first purchase of Stock pursuant to such Offer,
or the date of any such shareholder approval or adoption, or the
date on which the Company becomes aware of the acquisition of such
percentage of the Company's Stock (any such date being referred to
as an "Acceleration Date"), each outstanding Option and Alternative
Stock Appreciation Right shall be exercisable in full.
Notwithstanding any other provision of the Plan, each Option
granted under the Plan shall be evidenced by a Non-Qualified Stock
Option Agreement (the "Agreement") in such form, not inconsistent
with the Plan, as the Committee shall determine, and shall include
the substance of the following terms and conditions:
(a) The Agreement shall state that the Option is an option
which is not an "incentive stock option" under Section 422A of the
Code.
(b) The option price for each share of Stock covered by such
Option shall be an amount not less than 100% of the Fair Market
Value of the Stock on the date of grant of the Option.
(c) The Option by its terms shall not be transferable by the
Optionee otherwise than by will or by the laws of descent and
distribution and shall be exercisable, during his or her lifetime,
only by the Optionee.
(d) The Option by its terms shall not be exercisable after the
expiration of ten years from its date of grant.
(e) If Alternative Stock Appreciation Rights are granted in
connection with an Option, the Optionee, upon exercise of the
Option, in whole or in part, shall forfeit the related Alternative
Stock Appreciation Rights or portion thereof.
(f) The number of shares which are issued pursuant to the
exercise of an Option or Alternative Stock Appreciation Right shall
be charged against the maximum limitation on shares set forth in
Section 4.
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<PAGE> 6
(g) An Option may be exercised only by the Optionee during his
or her lifetime, and only by the Optionee's Post-Death
Representatives after his or her death. Option Agreements may
contain any provision approved by the Committee, not inconsistent
with Sections 7(d) and other provisions of this Plan, relating to
the period for exercise of Options after termination of employment,
death or disability.
Section 8. Alternative Stock Appreciation Rights.
-------------------------------------
(a) Alternative Stock Appreciation Rights may, in the
discretion of the Committee, be granted in connection with any
Option granted under the Plan. If Rights are granted to an
Optionee, the number of Rights granted with respect to any
particular Option shall equal the number of shares subject to such
Option. Each such Right shall be payable in shares of Stock as
provided below, provided that, in the sole discretion of the
Committee and subject to the provisions of this Section 8, any such
Right may be granted with a Cash Feature. In addition, a Cash
Feature may be conferred by the Committee at any time in connection
with any Alternative Stock Appreciation Right which did not
originally have such Feature, provided that the Optionee executes
an amendment to his or her Non-Qualified Stock Option Agreement
reflecting the Cash Feature within 30 days after such amendment is
mailed to him or her by the Company.
(b) If Alternative Stock Appreciation Rights are granted in
connection with an Option, the Optionee, upon exercise of the
Alternative Stock Appreciation Rights, shall forfeit the related
Option or portion thereof.
(c) An Alternative Stock Appreciation Right shall be subject
to the following terms and conditions:
(1) An Alternative Stock Appreciation Right shall be
exercisable by the Optionee only at such time or times and
to the extent, but only to the extent, that the related
Option shall be exercisable, unless the Committee specifies
a more restrictive period.
(2) The base price of an Alternative Stock
Appreciation Right shall be the option price per share of
the related Stock Option.
(3) The Alternative Stock Appreciation Right by its
terms shall be transferable only when the underlying Option
is transferable, and under the same conditions.
(4) An exercise of an Alternative Stock Appreciation
Right having no Cash Feature or an Alternative Stock
Appreciation Right having a Cash Feature if the Cash
Percentage then in effect is zero may be made at any time,
subject to any limitations on exercisability imposed upon
such Right by the Plan or by the terms of such Right, and
shall be payable solely in Stock.
6
<PAGE> 7
(5) If Alternative Stock Appreciation Rights which
have a Cash Feature are exercised outside of a Window
Period, they shall be payable solely in Stock.
(6) If Alternative Stock Appreciation Rights which
have a Cash Feature ("Cash Feature Rights") are exercised
(the "Current Exercise") within a Window Period, the
Optionee shall be paid in cash for:
(A)that number of Cash Feature Rights equal to
the Cash Percentage in effect on the date of exercise
(the "Current Cash Percentage") times the number of
Cash Feature Rights being exercised in the Current
Exercise, or,
(B)if greater, that number of Cash Feature
Rights (not to exceed the number of Rights being
exercised in the Current Exercise) equal to (i) the
Current Cash Percentage times the total number of
Cash Feature Rights and Options related to such
Rights exercised by the Optionee after June 24, 1987
(including the Current Exercise) less (ii) the number
of Cash Feature Rights paid in cash to the Optionee
prior to the Current Exercise.
Any remaining Cash Feature Rights being exercised in the
Current Exercise shall be paid in Stock. If Cash Feature
Rights relating to different grants of Alternative Stock
Appreciation Rights are exercised on the same day, the
exercises shall be deemed to occur in the order of the
grants.
(7) If, upon exercise, Alternative Stock Appreciation
Rights are payable in Stock under the above subparagraphs,
the Optionee shall be entitled to receive payment of the
number of shares of Stock determined by dividing
(A)the aggregate Spread on such Rights payable
in Stock by
(B)the Fair Market Value of a share of Stock on
the exercise date of such Rights.
If the resulting number of shares so obtained includes a
fraction of one-half or more, the number shall be raised
to the next higher whole number, but if the fraction is
less than one-half, the fraction shall be disregarded.
(8) If, upon exercise, Alternative Stock Appreciation
Rights are payable in cash under the above subparagraphs,
the Optionee shall receive cash equal to the aggregate
Spread applicable to such Rights payable in cash.
(9) Notwithstanding any other provision of this Plan,
Alternative Stock Appreciation Rights which have a Cash
Feature and Options related to such Rights shall not be
7
<PAGE> 8
exercised during the first six months of their respective
terms, except that this limitation shall not apply in the
event death or disability of the Optionee occurs prior to
the expiration of the six-month period.
(10) If Alternative Stock Appreciation Rights have a
Cash Feature, the Options to which such Rights relate shall
not be exercisable during a Window Period, unless the Cash
Percentage then in effect is zero.
(11) For the purposes of applying the provisions of
this paragraph (c), unless otherwise specifically provided,
any deceased Optionee's past exercises of Options and
Alternative Stock Appreciation Rights shall be attributed
to his or her Post-Death Representative(s), and such
Representative(s) shall be treated as having stepped into
the Optionee's shoes.
(d) If an Alternative Stock Appreciation Right is exercised,
there shall be charged against the maximum limitation on shares set
forth in Section 4:
(1) the number of shares which are issued pursuant to
subparagraph (c)(7) of this Section 8, and
(2) the number of shares determined by dividing the
amount of cash paid pursuant to subparagraph (c)(8) by the
Fair Market Value of a share of Stock on the date of such
exercise, rounding any fractional shares up or down in the
manner provided in the last sentence of subparagraph
(c)(7).
(e) The Committee shall be empowered to adopt, rescind and
amend such rules from time to time, with or without notice to
affected Optionees, as it may deem appropriate in order to
determine the Cash Percentage relating to exercises of Alternative
Stock Appreciation Rights having a Cash Feature, to implement the
provisions of this Section 8, and to exercise any discretion
granted to the Committee hereunder, provided that no such rules may
be inconsistent with the provisions of Rule 16b-3.
(f) Any attempted exercise of an Alternative Stock
Appreciation Right by an Optionee in contravention of this Section
8 or the Committee's rules authorized hereunder or Rule 16b-3 shall
be null and void. No Optionee shall have any vested or enforceable
interest in any Cash Feature or any Committee rules relating
thereto.
(g) This Section 8 and the related definitions in Section 2
shall be interpreted and applied so as to conform with the
requirements and limitations of Rule 16b-3, as amended from time to
time. Any amendment to or new interpretation of Rule 16b-3 which
creates or makes more restrictive one or more limitations shall
automatically, upon becoming effective, apply to exercises of
Alternative Stock Appreciation Rights, whether or not this Section
8 (or Section 2) is formally amended and conformed to Rule 16b-3 at
8
<PAGE> 9
that time. Any amendment to or new interpretation of Rule 16b-3
which eliminates or relaxes any such limitations shall apply to
such exercises only after this Section 8 (or Section 2) is formally
amended, provided that any such amendment hereof may be applied
retroactively to the date of any such amendment to Rule 16b-3. As
used in this paragraph, the term "interpretation" refers to an
official interpretation of the Securities and Exchange Commission
or its staff or any court of competent jurisdiction.
(h) The Committee may act, pursuant to authority expressly or
implicitly given the Committee in the Plan, by any appropriate
means. Without limiting the generality of the foregoing, the
Committee may act by resolution adopted at a meeting or adopted by
written consent of the Committee members without a meeting.
Meetings may be attended in person, conducted by conference
telecommunications where each member is able to speak and be heard
by each other member, or conducted using a combination of
attendance and conference telecommunications.
Section 9. Agreement to Serve.
------------------
Each Optionee shall agree that he or she will remain in the
service of the Company or a parent or subsidiary of the Company for
at least two years from the date of grant to him or her of an
Option, at the pleasure of the Board of Directors and at such
compensation as the Board of Directors or any Committee thereof or
the appropriate officers of the Company shall reasonably determine
from time to time. If any Optionee voluntarily terminates such
employment prior to the expiration of said two year period in
violation of the foregoing provisions of this Section 9, or if at
any time the Optionee is dismissed from such employment for any
reason, such Option (and any other Option or Options held by him or
her under the Plan) to the extent not theretofore exercised shall
forthwith terminate. The Committee may waive, in whole or part and
for any reason the Committee deems appropriate, any termination
caused by this Section 9 of any Option or group of Options.
Section 10. Condition to Exercise of Options.
--------------------------------
(a) The exercise of any Option under the Plan, including any
Alternative and Limited Stock Appreciation Rights granted in
connection with any Option, shall be conditioned on the Optionee at
all times during his or her employment with the Company having
continuously satisfied his or her duties of loyalty and faithful
service to the Company and having refrained from engaging in any
undisclosed conflict of interest or from otherwise acting in any
manner inimical to or contrary to the best interests of the
Company. Any violation of law or of any Company policy or the
Business Practices and Ethics Manual of the Company shall be
considered conduct inimical to or contrary to the best interests of
the Company for the purposes of this Section 10. The exercise of
any Option or Rights shall be deemed to be the certification by the
Optionee that he has satisfied this condition. In addition, the
Optionee shall furnish to the Committee on request any other
9
<PAGE> 10
information concerning satisfaction of such condition which the
Committee may request.
(b) This Section 10 is intended to establish, as a condition
to the realization of economic benefits under the Plan, a standard
of conduct consistent with (i) the duties of loyalty and faithful
performance of services imposed on an employee by the common law,
and (ii) the Company's published standards and policies which the
Optionee is bound to observe. This Section 10 shall in no way
impair or derogate from the rights or remedies which the Company
may have at law or in equity or under any employment contract or
agreement with an Optionee to prevent or to recover damages for the
disclosure of trade secrets, or to recover any restitution or
damages properly owing the Company because of any theft, fraud,
embezzlement, or other illegal conduct on the part of an Optionee.
(c) If the Committee determines that an Optionee has not
observed the standard of conduct required by this Section 10, the
Committee may require the Optionee to forfeit any right to or in
any unexercised Options, including any Alternative and Limited
Stock Appreciation Rights granted in connection with any Option, as
of the date such determination is made, and may require repayment
of any economic benefit received as a result of the exercise of any
Option or Alternative or Limited Stock Appreciation Right after the
act or acts of misconduct which gave rise to the Committee's
determination.
(d) This Section 10 shall not be interpreted as requiring the
Committee to take action in each and every instance of suspected
misconduct, and in determining to attempt to enforce the forfeiture
and repayment provisions of this Section 10, the Committee may
consider, among other things, the possible economic effects, the
circumstances surrounding the discontinuance of the Optionee's
employment with the Company and the amount of proof which the
Company may have of any alleged misconduct. Any decision by the
Committee to forego enforcement of this Section 10 in whole or in
part in any particular instance shall in no way constitute a waiver
of the right to enforce such Section in any other instance.
(e) During the period of any investigation into whether an
Optionee has engaged in conduct prohibited by this Section 10, the
Optionee's rights to exercise any Option and any related
Alternative and Limited Stock Appreciation Rights shall be
suspended.
Section 11. Exercise of Options.
-------------------
(a) An Optionee may pay the option price of an Option in cash,
Stock (including shares of previously-owned Stock, or Stock
issuable in connection with the Option), or other property, to the
extent permitted or required by the Option Agreement or the
Committee from time to time. The Committee may permit deemed or
constructive transfers of shares in lieu of actual transfer and
physical delivery of certificates. Except to the extent prohibited
by applicable law, the Committee or its delegate may take any
10
<PAGE> 11
necessary or appropriate steps in order to facilitate the payment
of any such purchase price. Without limiting the foregoing, the
Committee may allow the Optionee to defer payment of the option
price, or may cause the Company to loan the option price to the
Optionee or to guaranty that any shares to be issued will be
delivered to a broker or lender in order to allow the Optionee to
borrow the purchase price. The Committee may require satisfaction
of any rules or conditions in connection with paying the Option
price at any particular time, in any particular form, or with the
Company's assistance.
(b) When an Optionee's Employer becomes required to collect
Required Withholding Taxes, the Optionee shall promptly pay to the
Company or Employer (as required by the Committee) the amount of
such Required Withholding Taxes in cash, unless the Option
Agreement or the Committee permits or requires payment in another
form. In the discretion of the Committee or its delegate and at
the Optionee's request, the Committee or its delegate may cause the
Company or Employer to pay Withholding Taxes in excess of Required
Withholding Taxes on behalf of an Optionee, which shall be
reimbursed by the Optionee. The Committee may allow an Optionee to
pay or reimburse the Company or Employer with shares of Stock
(other than Restricted Stock granted under the Anheuser-Busch
Companies, Inc. 1989 Incentive Stock Plan) or other property. The
Committee may require the satisfaction of any rules or conditions
in connection with any non-cash payment of Withholding Taxes. If
an Optionee is a Reporting Person at the time of grant or during an
Option's term and is given an election to pay any Withholding Taxes
with Stock, the Committee shall have the sole discretion to approve
or disapprove such election at any time after the election is made.
As used in this subsection:
(i) "Withholding Taxes" means, in connection with the
exercise of an Option, (A) the total amount of Federal and
state income taxes which the Employer of the Optionee is
required to withhold ("Required Withholding Taxes") plus
(B) any other income taxes which the Employer withholds at
the request of the Optionee.
(ii) "Employer" means the Company or Subsidiary which
employs the Optionee.
Section 12. General Provisions.
------------------
(a) The Company shall not be required to issue or deliver any
certificates for shares of Stock to an Optionee upon the exercise
of his or her Option or Alternative Stock Appreciation Rights,
prior to
(i) if requested by the Company, the filing with the
Company by the Optionee or the Optionee's Post-Death
Representative of a representation in writing that at the
time of such exercise it is his or her then present
intention to acquire the shares of Stock being purchased
for investment and not for resale, and/or the completion
11
<PAGE> 12
of any registration or other qualification of such shares
of Stock under any State or Federal laws or rulings or
regulations of any government regulatory body, which the
Company shall determine to be necessary or advisable, and
(ii) the listing, or approval for listing upon notice
of issuance, of such shares of Stock on the New York Stock
Exchange or such other securities exchange as may at the
time be the principal market for the Stock, and
(iii) the obtaining of any other consent, approval or
permit from any State or Federal governmental agency which
the Committee shall, in its absolute discretion upon the
advice of counsel, determine to be necessary or advisable.
(b) An Optionee shall have none of the rights of a shareholder
with respect to shares of Stock subject to his or her Option until
shares of Stock are issued to him or her upon the exercise of his
or her Option.
(c) The Optionee may be required to pay to the Company the
amount of any withholding taxes which the Company is required to
withhold with respect to the exercise of an Option or Alternative
Stock Appreciation Right.
Section 13. Adjustments and Acquisitions
----------------------------
In the event of (i) any change in the outstanding shares of
Stock by reason of any stock split, combination of shares, stock
dividend, reorganization, merger, consolidation, or other corporate
change having a similar effect, or (ii) any separation of the
Company including a spin-off or other distribution of stock or
property by the Company, or (iii) any distribution to stockholders
generally other than a normal dividend, the Committee shall make
such equitable adjustments to the Plan and to outstanding Options,
Alternative Stock Appreciation Rights and Limited Rights as it
shall deem appropriate in order to prevent the dilution or
enlargement of the economic value of outstanding Options,
Alternative Stock Appreciation Rights. Any such determination by
the Committee shall be conclusive and binding on all concerned.
Section 14. Duration, Amendment and Termination.
-----------------------------------
The Board of Directors may at any time terminate the Plan or
make such amendments thereof as it shall deem advisable and in the
best interests of the Company, without further action on the part
of the shareholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
Optionee, adversely affect or impair the rights of such Optionee,
and provided further, that, unless the shareholders of the Company
shall have first approved thereof, no amendment of this Plan shall
be made whereby (a) the total number of shares of Stock which may
be optioned under the Plan to all individuals, or to any of them,
shall be increased, except by operation of the adjustment
provisions of Section 13 hereof, (b) the authority to administer
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<PAGE> 13
the Plan by a committee consisting of directors of the Company not
eligible to receive Options granted under the Plan shall be
withdrawn, (c) the term of the Options shall be extended, (d) the
minimum option price shall be decreased, or (e) the class of
employees to whom Options may be granted shall be changed.
The period during which Options may be granted under the Plan
shall terminate on December 21, 1991, unless the Plan shall
theretofore have been terminated as hereinabove provided.
Section 15. Shareholder Approval.
--------------------
No Option or Alternative Stock Appreciation Right granted under
the Plan may be exercised in whole or in part until adoption of the
Plan is approved by the affirmative vote of a majority of the
outstanding shares of the Company entitled to vote at a meeting of
the shareholders duly called for the purpose of voting thereon, and
unless the Plan is approved by the shareholders within one year of
its adoption by the Board of Directors.
Section 16. Date of Granting of Options.
---------------------------
Nothing contained in the Plan or in any resolution adopted or
to be adopted by the Board of Directors or the shareholders of the
Company shall constitute the granting of any Option hereunder. The
date of grant of an Option pursuant to the Plan shall be the date
of grant thereof by the Committee. Within ten business days after
the date of grant of the Option, the Company shall notify the
Optionee of the grant of the Option, and shall mail to the Optionee
a Non-Qualified Stock Option Agreement, duly executed by and on
behalf of the Company, with the request that the Optionee execute
the Agreement within thirty days after the date of mailing by the
Company of the Agreement to the Optionee. If the Optionee shall
fail to execute the written option agreement within said thirty-day
period, his or her Option shall be automatically terminated.
Section 17. Stock Appreciation Rights - Limited Rights.
------------------------------------------
(a) The Committee shall have authority to grant a stock
appreciation right (referred to in this Section 17 as a "Limited
Right") to the holder of any Option granted under the Plan (the
"Related Non-Qualified Stock Option") with respect to all or some
of the shares of Stock covered by such Related Non-Qualified Stock
Option. A Limited Right may be granted either at the time of grant
of the Related Non-Qualified Stock Option or at any time thereafter
during its term (except as otherwise provided in Section 14
hereof). A Limited Right may be granted to an Optionee
irrespective of whether such Optionee is being granted or has been
granted an Alternative Stock Appreciation Right under Section 8
hereof. A Limited Right may be exercised only during the sixty-day
period beginning on an "Acceleration Date" (as defined in Section
7 hereof); provided, however, that if the Acceleration Date occurs
within the six-month period following the grant of the Limited
Right or the grant of the Related Non-Qualified Stock Option and
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<PAGE> 14
Alternative Stock Appreciation Right, whichever is applicable as
provided below, then the Limited Right will be exercisable for a
period of sixty days following expiration of such six-month period.
Each Limited Right shall be exercisable only if, and to the extent
that, the Related Non-Qualified Stock Option is exercisable.
Notwithstanding the provisions of the two immediately preceding
sentences, no Limited Right may be exercised until the expiration
of six (6) months from the date of grant of the Limited Right
unless otherwise permitted under Rule 16b-3 under the Act in the
case of an Optionee whose Related Non-Qualified Stock Option was
granted prior to the grant of the Limited Right.
Upon the exercise of a Limited Right, such Related
Non-Qualified Stock Option and Alternative Stock Appreciation Right
shall cease to be exercisable to the extent of the shares of Stock
with respect to which such Limited Right is exercised, but shall be
considered to have been exercised to that extent for purposes of
determining the number of shares of Stock available for the grant
of further Options and Alternative Stock Appreciation Rights
pursuant to this Plan. Upon the exercise of termination of a
Related Non-Qualified Stock Option or Alternative Stock
Appreciation Right, the Limited Right with respect to such Related
Non-Qualified Stock Option shall terminate to the extent of the
shares of Stock with respect to which the Related Non-Qualified
Stock Option was exercised or terminated.
(b) Upon the exercise of a Limited Right, the holder thereof
shall receive in cash whichever of the following amounts is
applicable:
(i) in the case of an exercise of Limited Rights by
reason of the occurrence of an Offer (as defined in Section
7 hereof), an amount equal to the Offer Spread (as defined
in Section 17(d) hereof);
(ii) in the case of an exercise of Limited Rights by
reason of shareholder approval of an agreement described
in Section 7, an amount equal to the Merger Spread (as
defined in Section 17(f) hereof); or
(iii) in the case of an exercise of Limited Rights by
reason of stockholder approval of a plan of liquidation
described in Section 7, an amount equal to the Liquidation
Spread (as defined in Section 17(h); or
(iv) in the case of an exercise of Limited Rights by
reason of an acquisition of Stock described in Section 7,
an amount equal to the Acquisition Spread (as defined in
Section 17(j) hereof).
(c) The term "Offer Price per Share" as used in this Section
17 shall mean, with respect to the exercise of any Limited Right by
reason of the occurrence of an Offer, the greater of (i) the
highest price per share of Stock paid in any Offer, which Offer is
in effect at any time during the sixty-day period ending on the
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<PAGE> 15
date on which such Limited Right is exercised, or (ii) the highest
Fair Market Value per Share of the Stock during such sixty-day
period. Any securities or property which are part or all of the
consideration paid for shares of Stock in the Offer shall be valued
in determining the Offer Price per Share at the higher of (A) the
valuation placed on such securities or property by the corporation,
person or other entity making such Offer or (B) the valuation
placed on such securities or property by the Committee.
(d) The term "Offer Spread" as used in this Section 17 shall
mean an amount equal to the product computed by multiplying (i) the
excess of (A) the Offer Price per Share over (B) the Option price
per share of Stock at which the Related Non-Qualified Stock Option
is exercisable, by (ii) the number of shares of Stock with respect
to which such Limited Right is being exercised.
(e) The term "Merger Price per Share" as used in this Section
17 shall mean, with respect to the exercise of any Limited Right by
reason of shareholder approval of an agreement described in Section
7, the greater of (i) the fixed or formula price for the
acquisition of shares of Stock specified in such agreement if such
fixed or formula price is determinable on the date on which such
Limited Right is exercised, and (ii) the highest Fair Market Value
per Share of the Stock during the sixty-day period ending on the
date on which such Limited Right is exercised. Any securities or
property which are part or all of the consideration paid for shares
of Stock pursuant to such agreement shall be valued in determining
the Merger Price per Share at the higher of (A) the valuation
placed on such securities or property by the corporation, person or
other entity which is a party with the Company to such agreement or
(B) the valuation placed on such securities or property by the
Committee.
(f) The term "Merger Spread" as used in this Section 17 shall
mean an amount equal to the product computed by multiplying (i) the
excess of (A) the Merger Price per Share over (B) the Option price
per share of Stock at which the Related Non-Qualified Stock Option
is exercisable, by (ii) the number of shares of Stock with respect
to which such Limited Right is being exercised.
(g) The term "Liquidation Price per Share" as used in this
Section 17 shall mean, with respect to the exercise of any Limited
Right by reason of shareholder approval of a plan of liquidation
described in Section 7, the greater of (i) the highest amount paid
or to be paid per share of Stock pursuant to the plan of
liquidation as determined by the Committee and (ii) the highest
Fair Market Value per Share of the Stock during the sixty-day
period ending on the date on which such Limited Right is exercised.
Any securities or property which (A) are part or all of the
consideration paid for shares of Stock pursuant to such plan of
liquidation or (B) are to be sold and the proceeds distributed in
liquidation shall be valued in determining the Liquidation Price
per share at the higher of (i) the valuation placed on such
securities or property by the Company upon the distribution of such
15
<PAGE> 16
securities or property in accordance with the plan of liquidation,
if known, at the time of the exercise of such Limited Right, or
(ii) the valuation placed on such securities or property by the
Committee.
(h) The term "Liquidation Spread" as used in this Section 17
shall mean an amount equal to the product computed by multiplying
(i) the excess of (A) the Liquidation Price per Share over (B) the
Option price per share of Stock at which the Related Non-Qualified
Stock Option is exercisable by (ii) the number of shares of Stock
with respect to which such Limited Right is being exercised.
(i) The term "Acquisition Price per Share" as used in this
Section 17 shall mean, with respect to the exercise of any Limited
Right by reason of an acquisition of Stock described in Section 7,
the greater of (i) the highest price per share stated on the
Schedule 13D, 14D-1 or similar schedule (or amendment thereto)
filed by the holder of 50% or more of the Company's voting power
which gives rise to the exercise of such Limited Right, and (ii)
the highest Fair Market Value per Share of the Stock during the
sixty-day period ending on the date the Limited Right is exercised.
(j) The term "Acquisition Spread" as used in this Section 17
shall mean an amount equal to the product computed by multiplying
(i) the excess of (A) the Acquisition Price per Share over (B) the
Option price per share of Stock at which the Related Non-Qualified
Stock Option is exercisable, by (ii) the number of shares of Stock
with respect to which such Limited Right is being exercised.
(k) Notwithstanding any other provision of the Plan, an
Alternative Stock Appreciation Right granted pursuant to Section
8 hereof may not be exercised at a time when any Limited Rights
held by the holder of such Right may be exercised.
(l) The term "Fair Market Value per Share of the Stock" as
used in this Section 17 shall mean, as of a particular date, (i) if
the shares of Stock are then listed on a national securities
exchange, the definition provided in Section 2(f) hereof, or (ii)
if the shares of Stock are not then listed on a national securities
exchange, the average of the closing bid and asked prices for
shares of Stock in the over-the-counter market for the last
preceding date on which there was a sale of Stock in such market.
16
<PAGE> 1
Ex-10.5
ANHEUSER-BUSCH COMPANIES, INC.
1989 INCENTIVE STOCK PLAN
(AS AMENDED DECEMBER 20, 1989, DECEMBER 19, 1990,
DECEMBER 15, 1993, DECEMBER 20, 1995, AND NOVEMBER 26, 1997)
SECTION 1. PURPOSE.
The purpose of the Plan is to attract, retain, motivate and reward
employees of the Company, its Subsidiaries and Affiliates with compensatory
arrangements that involve Options and SARs.
SECTION 2. DEFINITIONS.
(a) "Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(b) "Affiliate" means any entity in which the Company has a substantial
direct or indirect equity interest (other than a Subsidiary), as determined
by the Committee.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code as in effect from time to
time.
(e) "Committee" means the Stock Option Committee described in Section 12
hereof.
(f) "Company" means Anheuser-Busch Companies, Inc. and its successors.
(g) "Disability" means the condition of being "disabled" within the
meaning of Section 422(c)(6) of the Code or any successor provision.
(h) "Eligible Employee" means a person who is eligible to receive an
option under Section 4 of the Plan.
(i) "Employer" means the Company, the Subsidiary, or the Affiliate which
employs the Optionee.
(j) "Fair Market Value" of Stock on a given date means (i) the average
of the highest and lowest selling prices per share of Stock reported on the
New York Stock Exchange Composite Tape or similar facility for such date,
(ii) if Stock is not listed on the New York Stock Exchange, the average of
the highest and lowest selling prices per share of Stock as reported for
such date on the principal stock exchange in the U.S. on which Stock is
listed (as determined by the Committee), or (iii) if neither of the
preceding clauses is applicable, the value per share determined by the
Committee in a manner consistent with the Treasury Regulations under
Section 2031 of the Internal Revenue Code. If no sale of Stock occurs on
such date, but there were sales reported within a reasonable period both
before and after such date, the weighted average of the means between the
highest and lowest selling prices on the nearest date before and the
nearest date after such date shall be used, with the average to be weighted
inversely by the respective numbers of trading days between the selling
dates and such date.
<PAGE> 2
(k) "ISO" or "Incentive Stock Option" means an option to purchase Stock
which is designated by the Committee as an "Incentive Stock Option" and
which qualifies as an "incentive stock option" under Section 422 (or any
successor provision) of the Code.
(l) "Limited Right" has the meaning given in Section 7.
(m) "NQSO" or "Non-Qualified Stock Option" means an option to purchase
Stock which is designated by the Committee as a "Non-Qualified Stock
Option," or which is designated by the Committee as an ISO but which fails
or ceases to qualify as an "incentive stock option" under the Code.
(n) "Option" means an ISO or an NQSO.
(o) "Option Agreement" means the written agreement referred to in
Section 5(a) between the Company and the Optionee evidencing an Option or
SAR.
(p) "Optionee" means a person to whom an Option or SAR is granted
pursuant to the Plan.
(q) "Plan" means the Anheuser-Busch Companies, Inc. 1989 Incentive Stock
Plan, as amended from time to time.
(r) "Reporting Person," as of a given date, means an Optionee who would
be required to report a purchase or sale of Stock occurring on such date to
the Securities and Exchange Commission pursuant to Section 16(a) of the Act
and the rules and regulations thereunder.
(s) "Rule 16b-3" means Rule 16b-3 (as amended from time to time)
promulgated by the Securities and Exchange Commission under the Act, and
any successor thereto, as in effect as to the Plan. (t) "SAR" means a
stock appreciation right, which is the right to receive cash, Stock, or
other property having a value on the date the SAR is exercised equal to (i)
the excess of the Fair Market Value of one share of Stock on the exercise
date over (ii) the base price of the SAR. The term "SAR" does not include
a Limited Right.
(u) "Stock" means shares of the common stock of the Company, par value
$1.00 per share, or such other class or kind of shares or other securities
as may be applicable under Section 10.
(v) "Subsidiary" means a "subsidiary corporation" of the Company as
defined in Section 424 (or any successor provision) of the Code.
(w) "Withholding Taxes" means, in connection with an Option or SAR
(including without limitation the receipt of Stock pursuant to the exercise
of an NQSO or SAR or the disposition of ISO shares), (a) the total amount
of Federal and state income taxes, social security taxes and other taxes
which the Employer of the Optionee is required to withhold ("Required
Withholding Taxes") plus (b) any other such taxes which the Employer, in
its sole discretion, withholds at the request of the Optionee.
SECTION 3. MAXIMUM SHARES.
(a) The maximum number of shares of Stock which may be issued to
Eligible Employees pursuant to Options and SARs under the Plan shall be
44,000,000 shares, subject to adjustment as provided in Section 10. For
this purpose:
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(i) Only shares actually issued pursuant to the grant or
exercise of an Option or SAR shall be counted against the Plan
maximum.
(ii) Except to the extent prohibited by Rule 16b-3, Shares
which are forfeited by an Optionee after issuance shall be
deemed to have never been issued under the Plan and accordingly
shall not be counted against the Plan maximum.
(iii) The number of shares available for the grant of new
Options and SARs at any particular time shall be (A) the
maximum number of shares specified above (as adjusted), minus
(B) the sum of the number of shares issued under the Plan prior
to that time and the number of shares issuable upon exercise of
Options and SARs outstanding at that time.
In its discretion, the Company may issue treasury shares or authorized but
previously unissued shares.
(b) Notwithstanding paragraph (a) above, the maximum number of shares
for which ISOs may be granted under the Plan shall be 44,000,000 shares,
subject to adjustment as provided in Section 10, regardless of the fact
that a lesser number of shares is issued pursuant to the exercise of ISOs.
(c) Shares issued under other plans of the Company shall not be counted
against the Plan maximum.
(d) Notwithstanding any other provisions of this Plan, the maximum
number of options that may be granted to any Eligible Employee during any
calendar year shall be 500,000, subject to adjustment as provided in
Section 10.
SECTION 4. ELIGIBILITY.
Officers and management employees of the Company, Subsidiaries or
Affiliates shall be eligible to receive Options and SARs under the Plan. A
Director of the Company or a Subsidiary or an Affiliate shall be eligible
only if he or she also is an officer or employee of the Company, a
Subsidiary or an Affiliate. Notwithstanding the foregoing, persons
employed only by Affiliates shall not be eligible to receive ISOs.
SECTION 5. OPTION AND SAR GRANTS.
(a) Subject to the limitations in this Plan, the Committee may cause
the Company to grant Options and/or SARs to such Eligible Employees, at
such times, in such amounts, for such periods, becoming exercisable at such
times, with such option prices or base prices, and subject to such other
terms, conditions, and restrictions as the Committee deems appropriate.
Each Option or SAR shall be evidenced by a written Option Agreement between
the Company and the Optionee. In granting an Option or SAR, the Committee
may take into account any factor it deems appropriate and consistent with
the purpose of the Plan. Options and/or SARs may be granted as additional
compensation to the Optionee, or in lieu of other compensation. The
Committee may delegate to officers of the Company from time to time the
authority to determine the sizes, dates, and other terms and conditions of
Options and/or SARs granted hereunder, provided that (i) the Committee may
impose such limitations and conditions upon any such delegated authority as
it deems appropriate, and (ii) the Committee may not delegate any such
authority with respect to Options or SARs granted to a Reporting Person.
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(b) Options and SARs may be granted separately or as alternatives to
each other, except that (i) Options and SARs shall be granted as
alternatives to each other only if the option prices and the base prices
are equal, (ii) Limited Rights shall not be granted separately, and shall
be granted only as alternatives to Options and/or SARs, (iii) SARs and/or
Limited Rights which are alternatives to ISOs may be granted only at the
same time the ISO is granted, and (iv) SARs which are alternatives to
Options, and Limited Rights which are alternatives to Options or SARs,
shall expire or erminate at the same time as the Option or SARs to which
they are alternatives.
(c) All or any portion of any payment to an Optionee whether in cash or
shares of Stock, may be deferred to a later date if and as provided in the
Option Agreement. Deferrals may be for such periods and upon such terms
and conditions (including the provision of interest, dividend equivalents,
or other return on such amounts) as the Committee may determine.
(d) Option Agreements may contain any provision approved by the
Committee, not inconsistent with Section 9, relating to the period for
exercise after termination of employment, death or Disability.
(e) Option Agreements may, in the discretion of the Committee, contain
a provision permitting an Optionee to designate the person who may exercise
an Option or SAR upon the Optionee's death, either by Will or by
appropriate notice to the Company.
(f) Notwithstanding any other provision of this Section 5, (i) no
Option or SAR shall contain a so-called reload feature under which
Options or SARs are automatically granted to Optionees upon exercise of
Options or SARs, and (ii) no Option or SAR shall be granted in exchange for
a so-called underwater Option or SAR which has an option price or base
price in excess of the Fair Market Value of the Stock (nor shall an
underwater Option or SAR be amended to reduce its option price or base
price).
SECTION 6. PROVISIONS GOVERNING OPTIONS AND SARS.
(a) If Options and SARS are alternatives to each other, the exercise of
all or part of one automatically shall cause an immediate equal and
corresponding termination of the other.
(b) An Optionee shall have none of the rights of a shareholder with
respect to shares of Stock subject to his or her Option or SAR until shares
are issued in his or her name.
(c) Nothing in the Plan or any Option Agreement shall confer on any
person any right or expectation to continue in the employ of his or her
Employer, or shall interfere in any manner with the absolute right of the
Employer to change or terminate such person's employment at any time for
any reason or for no reason.
(d) The Committee may provide in Option Agreements for the
transferability of NQSOs, SARs, and Limited Rights (other than SARs and
Limited Rights which are alternatives to ISOs). Transferability may be
subject to such conditions and limitations as the Committee deems
appropriate; provided, however, that SARs and Limited Rights which are
alternatives to NQSOs may be transferred only in tandem with such NQSOs.
Except to the extent otherwise expressly set forth in the Option Agreement
or expressly permitted by the Committee in writing in accordance with the
foregoing, Options, SARs, and Limited Rights shall not be transferable
other than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by the Optionee or his or
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<PAGE> 5
her guardian or legal representative. The Committee shall determine the
extent to which limitations, covenants, and other provisions in the Option
Agreements and this Plan apply or relate to the original Optionee, his or
her transferee(s), or all of them.
(e) Except as provided in Section 10(b), (A) the option price per
share of an Option or the base price of an SAR shall not be less than Fair
Market Value on the Option's or the SAR's grant date, nor less than the par
value of a share of Stock, except that an SAR which is an alternative to an
Option but which is granted at a later time may have a base price equal to
the option price even though the base price is less than Fair Market Value
on the date the SAR is granted.
(f) The grant of an Option and the Option Agreement for an Option must
clearly identify the Option as either an ISO or as an NQSO.
(g) In the case of an SAR, the Option Agreement may specify the form of
payment of SARs or may provide that the form is to be determined at a later
date, and may require the satisfaction of any rules or conditions in
connection with receiving payment in any particular form. If the Optionee
is a Reporting Person at the time of grant or during the SAR's term and is
given an election to receive cash in full or partial settlement of an SAR,
the Committee shall have sole discretion to approve or disapprove such
election at any time after it is made.
SECTION 7. LIMITED RIGHTS.
(a) The Committee shall have authority to grant limited stock
appreciation rights ("Limited Rights") to the holder of any Option or SARs
granted under the Plan (the "Related Option or SAR") with respect to all or
some of the shares of Stock covered by such Related Option or SAR. A
Limited Right may be granted either at the time of grant of the Related
Option or SAR or (except in the case of an ISO) at any time thereafter
during its term. A Limited Right may be granted to an Optionee with
respect to Options irrespective of whether such Optionee is being granted
or has been granted an SAR. Limited Rights shall be transferable only when
the Related Option or SAR is transferable and under the same conditions,
and shall be exercisable during the Optionee's lifetime only by the
Optionee or his or her guardian or legal representative. If an ISO is a
Related Option to Limited Rights, the Limited Rights may be exercised only
if the Fair Market Value per share of Stock on the exercise date exceeds
the option price per share of the ISO. A Limited Right may be exercised
only during the sixty-day period beginning on an "Acceleration Date" (as
defined in Section 11(a) hereof); provided, however, that if the
Acceleration Date occurs within the six month period following the grant of
the Limited Right or the grant of the Related Option or SAR, whichever is
applicable as provided below, to a Reporting Person, then the Limited Right
will be exercisable by the Reporting Person for a period of thirty days
following expiration of such six-month period, or, if earlier, thirty days
following the Optionee's death or Disability. Each Limited Right shall be
exercisable only if, and to the extent that, the Related Option or SAR is
exercisable (ignoring paragraph (j) below). Notwithstanding the provisions
of the two immediately preceding sentences, no Limited Right may be
exercised by a Reporting Person until the expiration of six months from the
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date of grant of the Limited Right unless otherwise permitted by Rule 16b-3
in the case of an SAR granted prior to the grant of the Limited Right.
(b) Upon the exercise of Limited Rights, the holder thereof shall
receive in cash whichever of the following amounts is applicable:
(i) in the case of an exercise of Limited Rights by reason
of an acquisition of Stock described in Section 11(a), an
amount equal to the Acquisition Spread (as defined in paragraph
(d) below); or
(ii) in the case of an exercise of Limited Rights by reason
of shareholder approval of an agreement described in Section
11(a), an amount equal to the Merger Spread (as defined in
paragraph (f) below);
(iii) in the case of an exercise of Limited Rights by reason
of a change in the composition of the Board of Directors as
described in Section 11(a), an amount equal to the Board Change
Spread (as defined in paragraph (g) below);
(iv) in the case of an exercise of Limited Rights by reason
of stockholder approval of a plan of liquidation described in
Section 11(a), an amount equal to the Liquidation Spread (as
defined in paragraph (i) below);
provided, however, that if an ISO is a Related Option to the Limited
Rights, the cash received for each Right shall not exceed 100% of the
spread under the ISO, i.e., the difference between the option price of the
ISO and the Fair Market Value of Stock on the date the Limited Right is
exercised.
(c) The term "Acquisition Price per Share" as used in this Section
shall mean, with respect to the exercise of any Limited Right by reason of
an acquisition of Stock described in Section 11(a), the greater of (i) the
highest price per share of Stock stated on the Schedule 13D, 14D-1 or
similar schedule (or amendment thereto) filed by the holder of 50% or more
of the Company's voting power which gives rise to the exercise of such
Limited Right, and (ii) the highest Fair Market Value per share of Stock
during the sixty-day period ending on the date the Limited Right is
exercised.
(d) The term "Acquisition Spread" as used in this Section shall mean an
amount equal to the product computed by multiplying (i) the excess of (A)
the Acquisition Price per Share over (B) the option or base price per share
of Stock at which the Related Option or SAR is exercisable, by (ii) the
number of Limited Rights being exercised.
(e) The term "Merger Price per Share" as used in this Section shall
mean, with respect to the exercise of any Limited Right by reason of
shareholder approval of an agreement described in Section 11(a), the
greater of (i) the fixed or formula price for the acquisition of shares of
Stock specified in such agreement if such fixed or formula price is
determinable on the date on which such Limited Right is exercised, and (ii)
the highest Fair Market Value per share of Stock during the sixty-day
period ending on the date on which such Limited Right is exercised. Any
securities or property which are part or all of the consideration paid for
shares of Stock pursuant to such agreement shall be valued in determining
the Merger Price per share at the higher of (A) the valuation placed on
such securities or property by the corporation, person or other entity
which is a party with the Company to such agreement or (B) the valuation
placed on such securities or property by the Committee.
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(f) The term "Merger Spread" as used in this Section shall mean an
amount equal to the product computed by multiplying (i) the excess of (A)
the Merger Price per Share over (B) the option or base price per share of
Stock at which the Related Option or SAR is exercisable, by (ii) the number
of Limited Rights being exercised.
(g) The term "Board Change Spread" as used in this Section shall mean,
with respect to the exercise of any Limited Rights by reason of a change in
the composition of the Board described in Section 11(a), an amount equal to
the product computed by multiplying (i) the excess of (A) the highest Fair
Market Value per share of Stock during the sixty-day period ending on the
date the Limited Rights are exercised over (B) the option or base price per
share of Stock at which the Related Option or SAR is exercisable, by (ii)
the number of Limited Rights being exercised.
(h) The term "Liquidation Price per Share" as used in this Section
shall mean, with respect to the exercise of any Limited Right by reason of
shareholder approval of a plan of liquidation described in Section 11(a)
the greater of (i) the highest amount paid or to be paid per share of Stock
pursuant to the plan of liquidation as determined by the Committee and (ii)
the highest Fair Market Value per share of Stock during the sixty-day
period ending on the date on which such Limited Right is exercised. Any
securities or property which (A) are part or all of the consideration paid
for shares of Stock pursuant to such plan of liquidation or (B) are to be
sold and the proceeds distributed in liquidation shall be valued in
determining the Liquidation Price per share at the higher of (i) the
valuation placed on such securities or property by the Company upon the
distribution of such securities or property in accordance with the plan of
liquidation, if kno n, at the time of the exercise of such Limited Right,
or (ii) the valuation placed on such securities or property by the
Committee.
(i) The term "Liquidation Spread" as used in this Section shall mean an
amount equal to the product computed by multiplying (i) the excess of (A)
the Liquidation Price per Share over (B) the option or base price per share
of Stock at which the Related Option or SAR is exercisable, by (ii) the
number of Limited Rights being exercised.
(j) Notwithstanding any other provision of the Plan, an SAR may not be
exercised at a time when any Limited Rights held by the holder of such SAR
may be exercised.
(k) Notwithstanding the provisions of Section 7(a) above, if an
Acceleration Date specified in Section 11(a)(i) occurs and if such Date
occurs in connection with a Window Period Situation, then each Optionee who
is a Restricted Reporting Person may exercise his or her Limited Rights
only during the Window Period immediately following the Acceleration Date,
subject to the following exceptions: (i) if the Acceleration Date occurs
during the six-month period following the grant of a Limited Right or the
grant of the Related Option or SAR, whichever is applicable as provided in
the last sentence of Section 7(a) above, then such Limited Right may be
exercised by such Optionee only during the Window Period immediately
following the expiration of such six-month period or, if earlier, following
the death or Disability of such Optionee; and (ii) if such acceleration
Date or the expiration of such six-month period (as applicable) occurs
during a Window Period, such Optionee may exercise such Limited Right
either during the remainder of such Window Period or during the next whole
Window Period thereafter. For the purposes of this paragraph, a "Window
Period Situation" exists (A) if one or more Reporting Persons are the
Person or members of the group constituting the "Person" specified in
Section 11(a)(i) below, or (B) if, by excluding all voting securities
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<PAGE> 8
acquired by the "Person" directly from the Company, no Acceleration Date
would occur. Each Reporting Person specified in clause (A) above, and all
Reporting Persons in the case of a clause (B) Window Period Situation, are
"Restricted Reporting Persons" for the purposes of this paragraph. A
"Window Period" is the period defined from time to time in paragraph
(e)(3)(iii) of Rule 16b-3, or the corresponding paragraph(s) of any
successor to Rule 16b-3.
SECTION 8. STOCK ISSUANCE, PAYMENT, AND WITHHOLDING.
(a) An Optionee may pay the option price of an Option in cash, Stock
(including shares of previously-owned Stock, or Stock issuable in
connection with the Option), or other property, to the extent permitted or
required by the Option Agreement or the Committee from time to time. The
Committee may permit deemed or constructive transfers of shares in lieu of
actual transfer and physical delivery of certificates. Except to the
extent prohibited by applicable law, the Committee or its delegate may take
any necessary or appropriate steps in order to facilitate the payment of
any such purchase price. Without limiting the foregoing, the Committee may
allow the Optionee to defer payment of the option price, or may cause the
Company to loan the option price to the Optionee or to guaranty that any
shares to be issued will be delivered to a broker or lender in order to
allow the Optionee to borrow the purchase price. The Committee may require
satisfaction of any rules or conditions in connection with paying the
Option price at any particular time, in any particular form, or with the
Company's assistance.
(b) When the Optionee's Employer becomes required to collect and pay
Required Withholding Taxes, the Optionee shall promptly reimburse the
Company or Employer (as required by the Committee) for the amount of such
Required Withholding Taxes in cash, unless the Option Agreement or the
Committee permits or requires payment in another form. In the discretion
of the Committee or its delegate and at the Optionee's request, the
Committee or its delegate may cause the Company or Employer to pay
Withholding Taxes in excess of Required Withholding Taxes on behalf of an
Optionee, which shall be reimbursed by the Optionee. The Committee may
allow an Optionee to reimburse the Company or Employer for payment of
Withholding Taxes with shares of Stock or other property. The Committee
may require the satisfaction of any rules or conditions in connection with
any non-cash payment of Withholding Taxes. If an Optionee is a Reporting
Person at the time of grant or during the Option's term and is given an
election to pay any Withholding Taxes with Stock, the Committee shall have
sole discretion to approve or disapprove such election at any time after
the election is made.
(c) If provided in the Option Agreement relating to an ISO, the
Committee may prohibit the transfer by an Optionee of shares of Stock
issued to him or her upon exercise of an ISO into the name of a nominee,
and the Committee may require the placement of a legend on certificates for
such shares reflecting such prohibition.
SECTION 9. FORFEITURES.
(a) If any Optionee voluntarily terminates employment within two
years of the grant of an Option or SAR, or is dismissed from employment at
any time for any reason, such Option or SAR shall immediately terminate and
be forfeited to the extent not previously exercised.
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(b) Notwithstanding any other provision in this Plan except paragraph
(c) below, the receipt of any Option or SAR, and the receipt of any share
of Stock, cash, or other benefit in connection with such Option or SAR,
shall be subject to the following provisions:
(i) At all times during his or her employment with the Company or a
Subsidiary or Affiliate, the Optionee shall continuously satisfy his or
her duties of loyalty and faithful service to the Company and his or
her Employer and shall refrain from engaging in any undisclosed
conflict of interest or from otherwise acting in any manner inimical to
or contrary to the best interests of the Company
or Employer. Any violation of law or of any Company or Employer policy
or the Business Practices and Ethics Manual (or any manual, or portion
thereof, which replaces such Manual) of the Company shall be considered
conduct inimical to or contrary to the best interests of the Company
and Employer for the purposes of this Section 9(b). The exercise of
any Option or SAR, or the acceptance of any share of stock, cash, or
other benefit hereunder in connection with any Option or SAR shall be
deemed to be the certification by the Optionee that he or she has
satisfied this condition. In addition, the Optionee shall furnish to
the Committee on request any other information concerning satisfaction
of such condition which the Committee may request.
(ii) This Section 9(b) is intended to establish, as a condition to
the realization of economic benefits under the Plan, a standard of
conduct consistent with (A) the duties of loyalty and faithful
performance of services imposed on an employee by the common law, and
(B) the Company's and Employer's published standards and policies which
the Optionee is bound to observe. This Section 9(b) shall in no way
impair or derogate from the rights or remedies which the Company or
Employer may have at law or in equity or under any employment
contract or agreement with an Optionee to prevent or to recover damages
for the disclosure of trade secrets, or to recover any restitution or
damages properly owing the Company or Employer because of any theft,
fraud, embezzlement, or other illegal conduct on the part of an
Optionee.
(iii) If the Committee determines that an Optionee has not observed
the standard of conduct required by this Section 9(b), the Committee
may require the Optionee to forfeit any right to or in any outstanding
Option or SAR, as of the date such determination is made, and may
require repayment of any Stock or cash received in connection with any
Option or SAR by such Optionee after the act or acts of misconduct
which gave rise to the Committee's determination.
(iv) This Section 9(b) shall not be interpreted as requiring the
Committee to take action in each and every instance of suspected
misconduct, and in determining to attempt to enforce the forfeiture and
repayment provisions of this Section 9(b), the Committee may consider,
among other things, the nature of the misconduct, its seriousness, the
impact on the Company, the possible economic effects, the circumstances
surrounding the discontinuance of the Optionee's employment with the
Employer, and the amount of proof which the Employer may
have of any alleged misconduct. Any decision by the Committee to
forego enforcement of this Section 9(b) in whole or in part in any
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particular instance shall in no way constitute a waiver of the right to
enforce such Section in any other instance.
(v) During the period of any investigation into whether an Optionee
has engaged in conduct prohibited by this Section 9(b), the Optionee's
rights to receive delivery of any Stock or cash, or to have any
transfer of Stock recognized on the stock books of the Company, shall
be suspended. An Optionee may exercise Options or SARs subject to the
prior sentence.
(c) The Committee may include in an Option Agreement such provisions as
it shall deem appropriate, in its discretion, to deter competition with the
Company, a Subsidiary or an Affiliate, including provisions pertaining to
the refund of any economic benefit received by an Optionee from exercising
an Option. In addition, the Committee may waive, in whole or part, and for
any reason the Committee deems appropriate, any termination of an Option or
group of Options caused by this Section 9.
(d) The provisions of this Section 9 shall terminate upon the
occurrence of an Acceleration Date described in Section 11.
SECTION 10. ADJUSTMENTS AND ACQUISITIONS.
(a) In the event of (i) any change in the outstanding shares of Stock
by reason of any stock split, combination of shares, stock dividend,
reorganization, merger, consolidation, or other corporate change having a
similar effect, (ii) any separation of the Company including a spin-off or
other distribution of stock or property by the Company, or (iii) any
distribution to stockholders generally other than a normal dividend, the
Committee shall make such equitable adjustments to the Plan and to
outstanding Options, SARs and Limited Rights as it shall deem appropriate
in order to prevent the dilution or enlargement of (a) the Options, SARs
and Limited Rights which may be granted, the shares of Stock which may be
issued, or the shares for which ISOs may be granted under the Plan, (b) the
economic value of outstanding Options, SARs and Limited Rights or (c) the
limitations imposed by Section 3(d) of this Plan, provided, however, that
the Committee shall not make any adjustment which would constitute or
result in an increase in the aggregate number of Shares available under the
Plan, or the annual limit on the number of options which may be granted to
an Eligible Employee under Section 3(d) of this Plan, requiring shareholder
approval under Section 422 or Section 162(m) of the Code. Any such
determination by the Committee shall be conclusive and binding on all
concerned.
(b) In the event the Company or a Subsidiary enters into a transaction
described in Section 424(a) of the Code with any other corporation, the
Committee may grant Options, SARs, or Limited Rights to employees or former
employees of such corporation in substitution of stock options, stock
appreciation rights or limited stock appreciation rights previously granted
to them by such corporation upon such terms and conditions as shall be
necessary to qualify such grant as a substitution described in Section
424(a) of the Code.
SECTION 11. ACCELERATION.
(a) If, while unexercisable Options or SARs remain outstanding under
the Plan,
(i) any Person (as defined herein) becomes the beneficial owner
directly or indirectly (within the meaning of Rule 13d-3 under the Act)
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of more than 50% of the Company's then outstanding voting securities
(measured on the basis of voting power);
(ii) the shareholders of the Company approve a definitive agreement
to merge or consolidate the Company with any other corporation, other
than an agreement providing for (x) a merger or consolidation which
would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of
the Company, at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitalization of the Company
(or similar transaction) in which no Person acquires more than 50% of
the combined voting power of the Company's then outstanding securities;
(iii) a change occurs in the composition of the Board of Directors
during any period of twenty-four consecutive months such that
individuals who at the beginning of such period were members of the
Board of Directors cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for election
by the Company's shareholders, of each new director was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved; or
(iv) the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all the Company's assets,
then on the date as of which any of the events described in clauses (i)
through (iv) occurs (such date being referred to as an "Acceleration
Date"), each Option and SAR automatically shall become exercisable.
For purposes of this paragraph, "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; however, a Person shall not include (aa) the Company or
any of its subsidiaries, (bb) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (cc) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (dd) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Stock.
(b) Except to the extent prohibited by Rule 16b-3 in the case of
Reporting Persons, the Committee may accelerate the date on which any
Options and SARs become exercisable and may remove any restrictions on such
Options or SAR at any time after grant and for any reason the Committee
deems appropriate.
(c) All Options and SARs shall automatically become exercisable upon a
termination of employment caused by the death or Disability of the
Optionee.
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SECTION 12. ADMINISTRATION.
(a) The Plan shall be administered by a Stock Option Committee
appointed by the Board consisting of three or more persons, each of whom at
all times shall be a member of the Board, a disinterested person as
defined in Rule 16b-3 and an outside director within the meaning of
Section 162(m)(4)(C)(i) of the Code. Committee members shall not be
eligible for selection to receive Options or SARs under the Plan. The
initial Committee shall consist of the members of the "Stock Option
Committee" administering the Anheuser-Busch 1981 Non-Qualified Stock Option
Plan at the time this Plan is adopted by the Board.
(b) A majority of the members of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by a majority of the
members of the Committee, shall be the acts of the Committee. From time to
time the Committee may adopt, amend, and rescind such rules and regulations
for carrying out the Plan and implementing Option Agreements, and the
Committee may take such action in the administration of the Plan, as it
deems proper. The interpretation of any provisions of the Plan by the
Committee shall be final and conclusive unless otherwise determined by the
Board.
SECTION 13. AMENDMENT, TERMINATION, SHAREHOLDER APPROVAL.
(a) The Board may amend or terminate the Plan at any time, except that
without the approval of the Company's shareholders, no amendment shall (i)
increase the maximum number of shares issuable, or the maximum number of
shares for which ISOs may be granted, under the Plan, (ii) change the class
of persons eligible to be Optionees, (iii) change the annual limit on
options which may be granted to an Eligible Employee provided in Section
3(d) or (iv) change the provisions of this Section 13(a).
(b) The Committee may amend the Plan from time to time to the extent
necessary to (i) comply with Rule 16b-3 and (ii) prevent benefits under the
Plan from constituting "applicable employee remuneration" within the
meaning of Section 162(m) of the Code.
(c) No Options or SARs may be granted under the Plan after September
26, 1999.
(d) Notwithstanding any other provision of the Plan, no Option or SAR
granted under the Plan on or after December 15, 1993 may be exercised
unless and until either (i) the amendment to the Plan adopted by the Board
on December 15, 1993 which added Section 3(d) to this Plan is approved by
the Company's shareholders within twelve months of such adoption, or (ii)
if earlier, the Company receives an opinion of counsel or other evidence
satisfactory to it that such shareholder approval is not required by the
Code in order to prevent benefits under the Plan from constituting
"applicable employee remuneration" within the meaning of Section 162(m) of
the Code.
(e) The approval by shareholders described in this Section shall
consist of the approving vote of the holders of a majority of the
outstanding shares of Stock present (in person or by proxy) at a meeting of
the shareholders at which a quorum is present, unless a greater vote is
required by the Company's charter or by-laws or by applicable law.
SECTION 14. ADDITIONAL PAYMENTS.
12
<PAGE> 13
The Committee may grant an Optionee the right to receive additional
compensation in cash or other property (in addition to any cash or other
property payable under the terms of the Option or SAR itself) upon an
Option or SAR becoming exercisable or being exercised provided that (i) in
the case of an ISO such compensation is includible in income under Sections
61 and 83 of the Code at the time of such exercise and (ii) no such right
may be granted in connection with any SAR or Limited Right which is an
alternative to an ISO.
SECTION 15. MISCELLANEOUS.
(a) Each provision of the Plan and each Option Agreement relating to an
ISO shall be construed so that each ISO shall be an incentive stock option
as defined in Section 422 of the Code or any statutory provision that may
replace Section 422, and any provisions thereof which cannot be so
construed shall be disregarded. Except as provided in Section 9, no
discretion granted or allowed to the Committee under the Plan shall apply
to an ISO after its grant except to the extent the Option Agreement with
respect to the ISO grant shall so provide. Notwithstanding the foregoing,
nothing shall prohibit an amendment to an Option Agreement with respect to
an ISO which would change its status to an NQSO, so long as the Company and
the Optionee shall consent to such amendment.
(b) Without amending the Plan, Options and SARs may be granted to
Eligible Employees who are foreign nationals or who are employed outside
the United States or both, on such terms and conditions different from
those specified in the Plan as may, in the judgment of the Committee, be
necessary or desirable to further the purposes of the Plan. Such different
terms and conditions may be reflected in Addenda to the Plan. However,
in the case of an ISO, no such different terms or conditions shall be
employed if such term or condition constitutes, or in effect results in, an
increase in the aggregate number of shares which may be issued under the
Plan or a change in the definition of Eligible Employee.
(c) Notwithstanding any other provision in the Plan, the Committee
shall not act with respect to any Reporting Person in a manner which would
contravene any requirement of Rule 16b-3 as in effect at the time of such
action.
(d) Amendments to this Plan which were adopted by the Board on December
15, 1993 shall not apply to Options granted prior to that date except for
(i) the definition of "Required Withholding Tax" now contained in Section
2(w) and (ii) the amendment adding the express authority for beneficiary
designations which is contained in Section 5(e).
13
EX-10.10
THIRD AMENDMENT TO THE
ANHEUSER-BUSCH COMPANIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AS AMENDED AND RESTATED OCTOBER 1, 1993
Pursuant to Section 22 of the Anheuser-Busch Companies, Inc.
Supplemental Executive Retirement Plan (the "Plan"),
Anheuser-Busch Companies, Inc. (the "Company") reserved the right
to amend the Plan from time to time. The Company hereby amends
the Plan as set forth below, effective as of July 1, 1996.
The following Section 27 is added to the Plan:
Retirement of Jerry E. Ritter
- -----------------------------
For purposes of determining the amount payable to Jerry E. Ritter
in connection with his retirement on July 1, 1996, Mr. Ritter
shall be credited with thirty years of Credited Service and shall
be treated as if he had attained age sixty-two as of the date of
termination of his employment with Anheuser-Busch Companies, Inc.
In Witness Whereof, the appropriate officer of the Company has
executed this Amendment this 28th day of August, 1996.
Anheuser-Busch Companies, Inc.
/s/W. Randolph Baker
------------------------------------------
Vice President and Chief Financial Officer
EX-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:
Year Ended December 31,
----------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
7.3X 8.1X 1/ 6.6X 2/ 7.7X 5.8X 3/ 7.7X
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 one-time gain, the ratio would have been
7.9X.
2/ The ratio for 1995 includes the impact of the Tampa Brewery
shutdown and the reduction of wholesaler inventories. Excluding
these non-recurring items, the ratio would have been 7.6X.
3/ Includes the impact of the one-time, pre-tax restructuring
charge of $401 million as a result of the company's Profitability
Enhancement Program. Excluding this non-recurring special charge,
the ratio would have been 7.5X.
<PAGE> 1
MANAGEMENT'S DISCUSSION & ANALYSIS EX-13
OF OPERATIONS & FINANCIAL CONDITION
INTRODUCTION
This discussion summarizes the significant factors
affecting the consolidated operating results,
financial condition and liquidity/cash flows of
Anheuser-Busch Companies, Inc. for the three-year
period ended December 31, 1997. This discussion
should be read in conjunction with the Letter to
Shareholders, Consolidated Financial Statements and
Notes to the Consolidated Financial Statements included
in this annual report.
This discussion contains statements regarding the
company's expectations concerning its operations,
earnings and prospects. These statements are forward-
looking statements that involve significant risks and
uncertainties, and accordingly, no assurances can be
given that such expectations will be correct. These
expectations are based upon many assumptions that the
company believes to be reasonable, but such assumptions
may ultimately prove to be inaccurate or incomplete, in
whole or in part. Important factors that could cause
actual results to differ from the expectations stated
in this discussion include, among others, changes in the
pricing environment for the company's products; factors
that may affect domestic demand for malt beverage products;
changes in customer preference for the company s malt
beverage products; changes in raw materials prices; changes
in foreign currency exchange rates; changes in attendance
and 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.
Financial results for 1996 and 1995 were impacted by
certain significant one-time, nonrecurring transactions and
events which make meaningful comparisons among 1997, 1996
and 1995 more difficult. The specific transactions and events
are summarized below.
1996 TRANSACTION:
SALE OF THE ST. LOUIS CARDINALS
During the first quarter 1996, the company completed
the sale of the St. Louis Cardinals. The sale included Busch
Memorial Stadium and several nearby parking garages and other
properties in downtown St. Louis. The sale price was $150
million, resulting in a $54.7 million pretax gain ($.06 per
share after-tax) which is shown as a separate line item in
the Consolidated Statement of Income.
1995 TRANSACTIONS:
1. DIVESTITURE OF FOOD PRODUCTS SEGMENT
In the fourth quarter 1995, the Board of Directors
approved management's plan to divest the company's food
products segment through a tax-free 100% spin-off of The
Earthgrains Company (formerly known as Campbell Taggart,
Inc.) and the sale of the assets of Eagle Snacks, Inc. In
accordance with generally accepted accounting principles,
Anheuser-Busch restated all prior period financial information
to report the historical combined financial results of
Earthgrains and Eagle Snacks as discontinued operations, and
recorded an after-tax loss provision of $244.3 million in 1995
related to the divestiture. The loss provision was reported as
part of discontinued operations and consisted of the following
components (in millions):
- - Operating losses of Earthgrains and Eagle Snacks $ 18.8
- - Earthgrains spin-off costs 19.8
- - Estimated loss on sale of Eagle Snacks assets 205.7
------
$244.3
======
In connection with the Earthgrains spin-off, each Anheuser-
Busch shareholder received one share of Earthgrains voting
common stock for every 25 shares of Anheuser-Busch stock
owned in a special dividend distributed March 26, 1996 (25:1
ratio, reflected on a pre-September 1996 stock split basis).
Earthgrains common stock began trading on the New York Stock
Exchange as a separate company on March 27, 1996.
34 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 2
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
2. CONSOLIDATION OF BREWING CAPACITY RESULTING IN THE
CLOSURE OF THE TAMPA BREWERY
By utilizing the full production capacity of its
newest brewery in Cartersville, Ga., plus ongoing
modernization programs at its other 11 breweries,
Anheuser-Busch has added a significant amount of
efficient, lower-cost capacity in recent years. The
Tampa brewery was the company's highest cost-per-barrel
brewery and, accordingly, was closed in 1995, resulting
in a $160 million pretax write-off ($.19 per share
after-tax) in the fourth quarter 1995. This write-off
is shown as a separate line item in the company's
Consolidated Statement of Income.
3. REDUCTION OF BEER WHOLESALER INVENTORIES
In a move designed to provide the freshest possible
beer to the marketplace, achieve greater systemwide
distribution efficiencies and reduce costs, Anheuser
-Busch reduced wholesaler inventories by about one
-third during the fourth quarter 1995. This resulted in
Anheuser-Busch shipping approximately 1.1 million fewer
barrels of beer in the fourth quarter 1995 which
reduced net sales by approximately $107 million and
reduced operating profits by approximately $74.5
million. This financial impact is not separately
identified in the company's Consolidated Statement of
Income.
OBJECTIVES
Anheuser-Busch remains focused on achieving three
major objectives in future years in order to enhance
shareholder value:
1. Gaining an increased share of brewing industry
profitability in the United States by increasing unit
profitability and increasing market share in the longer
term. The company will continue to apply its marketing
expertise and substantial cash flow to achieve this
goal.
2. Continued globalization of beer operations by
building Budweiser brand equity worldwide and making
selected investments in brewers with leading brands in
key international beer growth markets. For 1997,
international beer volume grew at a double-digit pace
for the 16th consecutive year. The company made
significant marketing investments to build Budweiser
brand recognition outside the United States and made
capital investments in overseas brewing capacity in
both China and the United Kingdom. In May 1997,
Anheuser-Busch increased its equity stake in Grupo
Modelo's operating subsidiary, Diblo, to 37% and in
June exercised its remaining option to increase its
ownership in Diblo to 50.2%.
3. Continued support of the growth of packaging and
entertainment operations. Metal Container Corporation,
the company's can manufacturing subsidiary, provides
significant efficiencies and cost savings. The company
continues to invest in technology, capacity
improvements and quality-driven cost reductions to
support the success of domestic and international beer.
The company's Busch Entertainment theme park subsidiary
is a significant contributor to corporate earnings and
provides Anheuser-Busch with a unique opportunity to
showcase the company to over 20 million visitors
annually.
CONTINUING OPERATIONS
As noted, the significant nonrecurring transactions
in 1996 and 1995 make it difficult to directly compare
1997, 1996 and 1995 financial results. Therefore, in
order to facilitate a more complete and meaningful
understanding of company operating results, key
financial comparisons are presented in the following
summaries and throughout this discussion on a
"normalized" operations basis only, which excludes all
--------
nonrecurring transactions.
In February 1996, Anheuser-Busch reached an
agreement to sell most of its Eagle Snacks production
facilities to Frito-Lay, a subsidiary of PepsiCo, and
completed the sale in the second quarter 1996.
Accordingly, the company adjusted its previously
estimated loss provision for the disposition of the
food products segment and recognized a $33.8 million
after-tax gain ($.07 per share) during the second
quarter 1996. This gain is reported entirely in
Discontinued Operations and has no impact on financial
----------------------
results from Continuing Operations.
-----------------------------------
Anheuser-Busch Companies 35
1997 Annual Report
<PAGE> 3
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
Key financial comparisons from normalized
continuing operations (which exclude the financial
results of The Earthgrains Company and Eagle Snacks,
Inc.) are summarized in the following tables.
In the fourth quarter 1997, the company expensed
all previously capitalized and unamortized business
reengineering costs associated with the development
and installation of software, in accordance with a
recently mandated change in accounting practice. The
total write-off was $10 million after-tax ($.02 per
share) and is shown as a separate "cumulative effect
of accounting change" line item in the income statement,
below income from continuing operations. Because the
---
write-off has no impact on the company s results from
- -----------------------------------------------------
operations, it has been excluded from the following
- ----------
summaries.
Additionally, the company adopted Statement of
Financial Accounting Standards (FAS) No. 128, "Earnings
per Share (EPS)," in the fourth quarter 1997. The company
now reports basic and diluted EPS in place of the
former primary and fully diluted EPS, respectively.
Adoption of FAS 128 resulted in a slight increase in
basic EPS (vs. primary EPS). There was no change in diluted
------------------------------
EPS (vs. fully diluted EPS), one of the key measures used
- ---------------------------------------------------------
to evaluate the company s performance.
- -------------------------------------
- -----------------------------------------------------------------
1997 vs. 1996 (in millions, except per share)
- -----------------------------------------------------------------
| 1996 |
|------------|
| Normalized |
1997 | Operations |1997 vs. 1996
--------|------------|---------------
Gross Sales $12,832 | $12,622 |Up $210 Up 1.7%
Net Sales 11,066 | 10,884 |Up 182 Up 1.7%
Operating Income 2,053 | 2,029 |Up 24 Up 1.2%
Equity Income, Net of Tax 50 | |Up 50 N/M
Income from Continuing | |
Operations 1,179 | 1,123 |Up 56 Up 5.0%
Diluted Earnings per Share | |
from Continuing Operations 2.36 | 2.21 |Up .15 Up 6.8%
- -----------------------------------------------------------------
N/M - not meaningful
- -----------------------------------------------------------------
1996 vs. 1995 (in millions, except per share)
- -----------------------------------------------------------------
1996 | 1995 |
----------|-----------|
Normalized|Normalized |
Operations|Operations |1996 vs. 1995
----------|----------------------------
Gross Sales $12,622 |$12,131 |Up $491 Up 4.0%
Net Sales 10,884 | 10,448 |Up 436 Up 4.2%
Operating Income 2,029 | 1,867 |Up 162 Up 8.7%
Income from Continuing | |
Operations 1,123 | 1,032 |Up 91 Up 8.8%
Diluted Earnings per | |
Share from Continuing | |
Operations 2.21 | 1.99 |Up .22 Up 11.1%
- -----------------------------------------------------------------
- ----------------------------------------------------------------
1995 vs. 1994 (in millions, except per share)
- ----------------------------------------------------------------
1995 | |
-----------| |
Normalized | |
Operations | 1994 | 1995 vs. 1994
-----------------------------------
Gross Sales $12,131 |$11,705 |Up $426 Up 3.6%
Net Sales 10,448 | 10,025 |Up 423 Up 4.2%
Operating Income 1,867 | 1,853 |Up 14 Up 0.8%
Income from Continuing | |
Operations 1,032 | 1,015 |Up 17 Up 1.8%
Diluted Earnings per Share | |
from Continuing Operations 1.99 | 1.90 |Up .09 Up 4.5%
- ----------------------------------------------------------------
36 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 4
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
SALES
Total worldwide beer sales volume results are
summarized in the following table:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Worldwide Beer Sales Volume (barrels in millions)
-------------------------------------------------------------------------
1997 1996 Change | 1996 1995 Change | 1995 1994 Change
--------------------|--------------------|-------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic 89.6 88.9 Up 0.7%| 88.9 85.5 Up 4.0%| 85.5 86.5 Dn 1.1%
International 7.0 6.2 Up 13.4%| 6.2 5.4 Up 15.5%| 5.4 4.8 Up 11.9%
--------------------|--------------------|-------------------
Worldwide 96.6 95.1 Up 1.6%| 95.1 90.9 Up 4.7%| 90.9 91.3 Dn 0.4%
=============================================================
--------------------------------------------------------------------------
</TABLE>
WORLDWIDE BEER VOLUME
Worldwide beer volume is comprised of domestic
volume and international volume. Domestic volume
represents beer produced and shipped within the United
States. International volume represents exports from
the company's U.S. breweries to markets around the
world, plus Anheuser-Busch brands produced overseas by
company-owned breweries in Wuhan, China and London,
England and under license and contract brewing
agreements.
[SALES Reported international volume does not include
GRAPH] Anheuser-Busch's equity interests in the volume of
foreign brewers Grupo Modelo and Antarctica. However,
the company's share of its equity partners' volume is
gaining in significance. Assigning a portion of each
foreign partner's barrelage based on Anheuser-Busch's
investment percentage in those companies would result
in an equity volume of 6.8 million barrels for the
year. Combining equity volume with international volume
results in a 4.3% increase in beer volume for 1997
compared to 1996.
1997 vs. 1996
Gross sales were a record $12.8 billion and net
sales were $11.1 billion in 1997, representing
increases of $210 million and $182 million,
respectively, or 1.7%, compared to 1996. The difference
between gross and net sales for 1997 represents $1.77
billion of federal and state beer excise taxes.
The primary factors responsible for the sales
increases were higher domestic and international beer
sales volume, partially offset by increased price
discounting in the domestic beer market, and increased
sales from the company's theme park operations. Theme
park operations experienced an attendance increase of
approximately 7% in 1997 vs. 1996, to nearly 21 million
visitors, and also attained higher in-park per capita
revenues.
DOMESTIC BEER VOLUME
The increase in domestic volume during 1997 was
driven by the continued momentum of Bud Light, which
was up approximately 10%, and improved Budweiser
trends. Total Bud Family sales-to-retailers were up
almost 2% in 1997 compared to 1996.
Anheuser-Busch's domestic market share (excluding
exports) for 1997 and 1996 was 45.5% of industry
shipments. The company's domestic market share is based
on domestic volume of 89.6 million barrels in 1997 and
88.9 million barrels in 1996.
Anheuser-Busch's share of U.S. shipments for 1997
(including exports) was 45.3%, even compared with 1996
share. The company's market share is based on combined
domestic and export volume of 91.3 million barrels in
1997 and 91.0 million barrels in 1996. Market share of
U.S. shipments is determined based on industry sales
estimates provided by the Beer Institute and includes
imports, exports, nonalcohol brews and other malt
beverages. Anheuser-Busch has led the U.S. brewing
industry in sales volume and market share since 1957.
Operating performance for 1997 was significantly
impacted by aggressive price discounting initiated by
competition, which began in the first quarter and
became progressively deeper throughout the year.
Anheuser-Busch responded to the increased level of
discounting to keep its brands price-competitive and
protect its market share.
Recent results are encouraging. Volume trends are
favorable for the company's core premium brands.
Consumers are trading up to premium and higher-priced
Anheuser-Busch Companies 37
1997 Annual Report
<PAGE> 5
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
brands. Combined Budweiser and Bud Light results
are the best the company has experienced in recent
years. Budweiser experienced improved volume trends
and, as noted, Bud Light continued its double-digit
growth. The company's quality initiatives, including
the freshness campaign and a renewed focus on Anheuser-
Busch s 140-year heritage of quality and excellence,
have enhanced the company's quality perception among
consumers, especially in the important 21-to 27-year-
old segment.
Given the current pricing environment, the company
is not initiating front-line price increases to
wholesalers in the first quarter 1998, as has been
done in recent years. Instead, the company is reducing
its current level of discounting. This strategy is
designed to increase revenues, reduce the spread between
front-line and discounted prices to consumers, and
protect the company's brand equities.
INTERNATIONAL BEER VOLUME
Total international beer volume growth was strong
for 1997. Growth was led by combined Budweiser sales
volume increases in China and the United Kingdom of
44% for full-year 1997. The strong volume growth in
China and the United Kingdom has led to the expansions
of the company's breweries in those countries, both of
which are expected to be complete in 1998. Significant
gains in volume produced overseas in 1997 was partially
offset by reduced exports from the company's U.S.
facilities due in part to discontinuing Kirin Ice
shipments to Japan, lower shipments of Michelob Classic
Dark to Taiwan and a shift to local Budweiser production
in Brazil.
Total international volume, excluding equity share
volume, was up 13.4% for the year. Budweiser volume
outside the United States was up 985,000 barrels, or
18.3%, for 1997 vs. 1996.
1996 vs. 1995
Anheuser-Busch had gross sales during 1996 of
$12.6 billion, an increase of $491 million or 4.0%
over 1995 gross sales of $12.1 billion. Gross sales
include $1.74 billion in federal and state beer excise
taxes for 1996. Net sales for 1996 were $10.9 billion,
an increase of $436 million or 4.2% over 1995 net sales
of $10.4 billion.
The increase in gross and net sales in 1996 was
driven primarily by increased beer sales volume,
higher net revenue per barrel and higher theme park
revenues. Consolidated sales growth for 1996 would
have been even higher if not for lower sales by the
company's recycling operations due to lower aluminum
prices, and lower revenues due to the sale of the St.
Louis Cardinals during the first quarter 1996.
DOMESTIC BEER VOLUME
The company reported domestic 1996 sales volume
of 88.9 million barrels, an increase of 3.4 million
barrels, or 4.0%, vs. the 85.5 million barrels sold
during 1995.
As previously noted, 1995 volume was negatively
impacted by the beer wholesaler inventory reduction.
Excluding the inventory reduction, 1996 beer volume
would have increased 2.3 million barrels, or 2.7%,
over 1995.
Reported market share for 1996 (including exports)
was 45.3% of industry shipments, an increase of 1.2
share points when compared to 1995 reported market
share of 44.1% (including exports). Excluding the
impact of the wholesaler inventory reduction,
Anheuser-Busch's 1995 market share would have been
44.4%.
During 1996, Anheuser-Busch's core premium and
super-premium brands (the Budweiser and Michelob
Families) continued to gain momentum, with Bud
Light growing at an annualized double-digit pace.
Overall, Bud Family sales were up almost 4%.
INTERNATIONAL BEER VOLUME
The company's international beer volume
performance was strong during 1996, led by
continuing Budweiser sales expansion in the
United Kingdom, Ireland and Japan. Overall,
international volume was up 800,000 barrels,
or 15.5%, in 1996 compared to 1995.
38 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 6
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
1995 vs. 1994
Gross sales during 1995 of $12.1 billion were 3.6%
higher than 1994. Net sales for 1995 of $10.4 billion
were 4.2% higher than 1994. Gross sales include $1.68
billion in federal and state beer excise taxes for both
1995 and 1994.
Anheuser-Busch, Inc. reported domestic beer volume
of 85.5 million barrels in 1995, including the impact
of the beer wholesaler inventory reduction. Excluding
the 1995 beer wholesaler inventory reduction, Anheuser
-Busch, Inc. would have reported 1995 sales volume of
86.6 million barrels, an increase of 100,000 barrels,
or .1%, vs. the 86.5 million barrels sold during 1994.
Sales-to-retailers were up slightly in 1995 compared
to 1994. In 1995, Anheuser-Busch's core premium brands
(the Budweiser and Michelob Families) gained momentum,
with Bud Light increasing at a double-digit rate.
Led by sales volume growth in the United Kingdom and
Ireland, international beer volume was up 600,000
barrels, or 11.9% in 1995.
COST OF PRODUCTS AND SERVICES
Cost of products and services was $7.1 billion in
1997, an increase of 1.9% compared to 1996. The
increase in cost of products and services in 1997 is
attributable to increased beer sales volume and
slightly higher materials costs, plus costs associated
with higher theme park attendance. Gross profit as a
percentage of net sales was 35.9% for 1997, a decrease
of 0.1 percentage points compared to 36.0% for 1996,
due to slightly lower revenue per barrel in 1997.
Cost of products and services for 1996 was $7.0
billion, a 2.1% increase over the $6.8 billion reported
for 1995. This increase follows a 4.6% increase in
1995. The increase in the cost of products and services
in 1996 is attributable to increased beer sales volume
and increased raw material costs, particularly brewing
materials, partially offset by increased production
efficiency savings and lower scrap aluminum prices
related to recycling operations. Gross profit as a
percentage of net sales in 1996 increased 1.3
percentage points, compared to 34.7% for 1995,
reflecting higher net revenue per barrel sold and
productivity improvements.
During 1995, beer packaging costs increased
substantially as a result of higher aluminum costs.
However, such increases were mitigated by the company's
having protected pricing on more than half of its 1995
aluminum sheet requirements at prices below market
level. As a percent of net sales, gross profit for 1995
decreased .5 of a percentage point compared to 35.2%
for 1994.
The company continues to drive operating costs out
of its system. Brewery modernizations will yield long
-term savings through reduced beer packaging and
shipping costs and reduced maintenance and equipment
replacement costs. The focused production initiative
concentrates small-volume brand and package production
at three breweries and creates production efficiencies,
reduces costs and enhances responsiveness to changing
brand/package combinations. Also, the company is
working with its network of wholesalers to reduce
distribution costs through systemwide coordination.
MARKETING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES
Marketing, distribution and administrative expenses
for 1997 were $1.92 billion, compared with $1.89
billion for 1996, an increase of $26 million, or 1.4%.
The increase for 1997 is principally due to
marketing costs related to the company's international
beer activity, costs related to increased theme park
attendance, additional costs due to an increase in the
number of company-owned beer wholesale operations and
increased administrative expenses, partially offset by
lower promotional spending compared to last year due to
the 1996 Centennial Summer Olympic Games in Atlanta.
Marketing, distribution and administrative expenses
for 1996 were $1.89 billion, an increase of 7.6%
compared to 1995. These expenses increased in 1996
primarily due to sponsorship of the Centennial Summer
Olympic Games in Atlanta, increased spending to support
accelerated volume growth for premium brands and global
Budweiser brand-building initiatives.
Anheuser-Busch Companies 39
1997 Annual Report
<PAGE> 7
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
Marketing, distribution and administrative
expenses for 1995 were $1.76 billion, an increase
of 4.6% compared to 1994. These expenses increased
in 1995 primarily due to the addition of marketing
and distribution expenses for new beer brands and
higher international beer marketing expenses.
SYSTEMS-RELATED YEAR 2000 COSTS
Anheuser-Busch has identified its significant
software coding issues related to Year 2000 date
recognition for key accounting and operating
systems. The company is resolving the Year 2000
matter through either replacement of existing
systems with new Year 2000 compatible systems
or reprogramming existing systems. The company
incurred costs of $6.6 million in 1997 for Year
2000 reprogramming of existing systems. Year 2000
costs were not material in 1996 or 1995. The
company estimates incurring an additional $27
million to complete the reprogramming effort.
Completion of all reprogramming and appropriate
testing is expected prior to January 1, 2000. All
costs related to the reprogramming of existing
systems for the Year 2000 effort are expensed as
incurred. The company is also working with its key
suppliers and customers to ensure applicable Year
2000 issues are appropriately addressed. See Note
1 and Note 3 for additional information.
EMPLOYEE-RELATED COSTS
Total employee-related costs during 1997
totaled $1.79 billion, an increase of $10 million,
or .5%, vs. 1996 costs of $1.78 billion. Employee-
related costs during 1996 increased $46 million, [TOTAL
or 2.6%, compared to 1995 costs of $1.74 billion. EMPLOYEE-
Costs in 1995 increased 1.8% vs. 1994 costs of RELATED COSTS
$1.71 billion. The changes in employee-related GRAPH]
costs reflect normal increases in salaries, wages
and benefit levels for all years, partially offset
in 1997 and 1996 by lower pension and retiree
health care expense.
Salaries and wages paid during 1997 totaled
$1.48 billion, an increase of $31 million, or
2.1%, compared to $1.45 billion in salaries and
wages paid in 1996. The 1996 amounts represent an
increase of 5.0% vs. 1995. Pension, life insurance
and health care benefits amounted to $194.2 million
for 1997, a decrease of 12% vs. related 1996 costs
of $220.7 million. Payroll taxes in 1997 were $115.2
million, an increase of 4.6%, compared to 1996
payroll taxes of $110.1 million. These costs
decreased 10.2% and increased 1.0%, respectively,
in 1996 vs. 1995 costs of $245.7 million and $109.0
million. Full-time employees for continuing
operations numbered 24,326, 25,123 and 25,181 at
December 31, 1997, 1996 and 1995, respectively.
TAXES
The company is significantly impacted by federal,
state and local taxes, including beer excise taxes.
Taxes applicable to 1997 operations (not including
the many indirect taxes included in materials and
services purchased) totaled $2.67 billion, a decrease
of $8 million, or 0.3%, vs. 1996, and highlight the
burden of taxation on the company and the brewing
industry in general. Total taxes for 1996 increased
$241 million, or 9.9%, compared to 1995 taxes of $2.44
billion. This follows a decrease of 4.0% in 1995 vs.
1994. Total taxes include the impact of all
nonrecurring events and transactions.
The decrease in total taxes for 1997 compared
to 1996 is primarily attributable to reduced income
taxes due to lower pretax income and a lower
effective tax rate. The increase in total taxes for
1996 compared to 1995 is primarily due to higher
beer excise taxes from increased beer volume and
higher income taxes on the company's higher pretax
earnings level in 1996. The significant decrease in
total taxes for 1995 compared to 1994 is primarily
due to reduced income taxes on lower taxable income,
resulting from the costs associated with closing the
Tampa brewery and the impact of the beer wholesaler
inventory reduction. The beer wholesaler inventory
reduction also contributed to slightly lower beer
excise taxes in 1995.
40 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 8
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
OPERATING INCOME
Operating income represents the measure of the
company's financial performance before net interest
cost, other nonoperating items and equity income.
Operating income for 1997 was $2.05 billion, an
increase of $24 million, or 1.2%, compared to 1996. The
increase is primarily due to increased beer sales
volume, continued brewery operating efficiencies and
improved performance by the company's theme park
operations. As noted, domestic revenue per barrel for
1997 was down slightly vs. the 1996 level.
Theme park operations experienced their sixth
consecutive year of record attendance and profitability
and contributed over $100 million in operating income
for the first time in 1997. Aggregate attendance at
Busch Entertainment facilities was up approximately 7%
compared to 1996, to nearly 21 million visitors.
International beer profitability was down in 1997
compared to 1996 due to higher material and
distribution costs plus continued significant marketing
expenditures for Budweiser. Packaging operations also
contributed over $100 million in operating profits in
1997, down slightly when compared with 1996
performance.
[OPERATING
INCOME Operating income for 1996 was $2.03 billion, an
GRAPH] increase of $162 million, or 8.7%, compared to 1995.
The increase in 1996 operating income is due primarily
to higher beer sales volume and higher beer margins due
to increased revenue per barrel and continued
productivity improvements. Productivity improvements in
1996 generated nearly $100 million in cost savings vs.
1995. Metal Container Corporation reported flat profits
during 1996 vs. 1995 primarily due to weaker can
pricing.
International beer's profit contribution was down
somewhat in 1996 compared to 1995 due to substantially
higher investment spending on marketing for global
Budweiser brand building and having a full year of
operating results for the Wuhan brewery included in
1996 vs. only partial year results in 1995.
Busch Entertainment was a significant contributor to
corporate performance in 1996. This performance was
achieved despite an unusually active hurricane season
and a disruption in normal attendance patterns due to
the Centennial Summer Olympic Games in Atlanta. The
Busch Entertainment facilities achieved aggregate
record attendance of approximately 20 million guests in
1996, slightly exceeding the levels achieved in 1995.
Operating income for 1995 was $1.87 billion, an
increase of $14 million, or .8%, compared to 1994. The
increase in operating income for 1995 was primarily due
to the performance of the company s international beer
operations, which experienced a double-digit profit
contribution increase, packaging operations and theme
park operations.
NET INTEREST COST
Net interest cost (interest expense less interest
income) for 1997 was $253.3 million, an increase of
$29.9 million, or 13.4%, over net interest cost of
$223.4 million in 1996. The increase in net interest
cost is primarily the result of an increase in long
-term debt related to the additional investment in
Grupo Modelo in May 1997.
Net interest cost for 1996 represented an increase
of $7.4 million, or 3.4%, compared to 1995. This
increase was due to higher average debt balances
outstanding during the period, primarily as a result of
financing capital expenditures and share repurchases,
largely offset by lower average interest rates.
Net interest cost for 1995 was $216.0 million, a
decrease of $.7 million compared to 1994. The decrease
in net interest cost in 1995 was due to lower average
debt balances outstanding during the period, and higher
interest income offset by higher average interest
rates.
INTEREST CAPITALIZED
Interest capitalized increased $6.6 million in 1997
compared to 1996, to $42.1 million. Interest
capitalized increased $11.2 million, to $35.5 million
in 1996, after increasing $2.5 million in 1995. The
increases in all years are due primarily to higher
construction-in-progress levels resulting from
modernization projects at the company's breweries.
Anheuser-Busch Companies 41
1997 Annual Report
<PAGE> 9
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
OTHER INCOME/EXPENSE, NET
[INCOME FROM
Other income/expense, net includes numerous CONTINUING
items of a nonoperating nature which do not have OPERATIONS/
a material impact on the company's consolidated DIVIDENDS ON
results of operations, either individually or in COMMON STOCK
total. GRAPH]
Other expense, net was $9.3 million for 1997,
representing an increase of $6.3 million compared
to 1996. The increase in other expense, net, in
1997 is primarily attributable to the elimination
of dividend income reporting for the Grupo Modelo
investment due to the adoption of equity accounting
in the second quarter 1997.
Other expense, net was $3.0 million in 1996.
Other income, net was $20.5 million for 1995. The
change in 1996 compared to 1995 is primarily due
to the reclassification of certain purchase discounts
from other income/expense, net to cost of products
and services.
EQUITY INCOME, NET
In the second quarter 1997, the company for
the first time began recognizing its pro rata equity
interest in the net earnings of Grupo Modelo and
ANEP under the equity method of accounting, as a
separate line item in the Consolidated Statement
of Income. The company recognized after-tax equity
income of $50.3 million for 1997.
INCOME FROM CONTINUING OPERATIONS
Income from continuing operations was $1.18
billion for 1997, an increase of $56 million, or
5.0%, compared to 1996. Income from continuing
operations for 1996 was $1.12 billion, an increase
of 8.8% compared to 1995 income from continuing
operations of $1.03 billion. 1995 income from
continuing operations increased 1.8% compared to
1994.
The effective tax rate declined 0.5 percentage
points, to 38.4%, in 1997 vs. 1996, primarily
due to lower foreign taxes and nondeductible costs.
The company s effective tax rate declined to 38.9%
for 1996, from 39.1% for 1995 (normalized), due to
lower state taxes and nondeductible costs. The
effective tax rate in 1995 declined 0.4% vs. 39.5%
for 1994.
DILUTED EARNINGS PER SHARE FROM CONTINUING OPERATIONS
[DILUTED
Diluted earnings per share from continuing EARNINGS
operations for 1997 were $2.36, an increase of PER SHARE
$.15, or 6.8%, compared to $2.21 in 1996. Earnings FROM
per share for 1996 increased $.22, or 11.1%, CONTINUING
compared to 1995, which was up $.09, or 4.5% OPERATIONS
compared to 1994. Diluted earnings per share GRAPH]
benefit from the company's ongoing share repurchase
program. See Note 15 for information regarding the
company's share repurchases.
FINANCIAL POSITION
LIQUIDITY AND CAPITAL RESOURCES
The company's primary sources of liquidity are
cash provided from operations and financing activities.
Information on the company's consolidated cash flows
(categorized by operating activities, financing
activities and investing activities) for the years
1997, 1996 and 1995 is presented in the Consolidated
Statement of Cash Flows and Note 8.
Anheuser-Busch's strong financial profile allows
it to pursue growth while providing substantial direct
returns to shareholders. Accordingly, the company has
established well-defined priorities for its operating
cash flow:
- - Reinvesting in core businesses to achieve profitable
----------------------------------------------------
growth. The company will continue to make investments
- ------
in its capital asset base to ensure the highest
efficiency and lowest cost in its operations.
- - Making substantial cash payments directly to
--------------------------------------------
shareholders. The company's objective is to return
- ------------
cash to shareholders through consistent dividend
growth and the repurchase of approximately 3% to 4%
of outstanding common shares each year. The company
has paid dividends in each of the last 64 years.
42 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 10
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
Working capital at December 31, 1997 was $83.2
million compared to working capital of $34.9 million at
December 31, 1996 and $268.6 million at December 31,
1995. Cash and marketable securities were $147.3
million at December 31, 1997 and $93.6 million at both
December 31, 1996 and 1995.
The increase in cash and marketable securities at
December 31, 1997 compared to December 31, 1996 was
primarily related to cash generated from operations and
debt issuance, partially offset by cash used for
capital expenditures, share repurchases, dividends and
business investments. Cash flow from December 31, 1995
to December 31, 1996 is attributable to these same
factors plus proceeds from the sale of the assets of
Eagle Snacks, Inc., the sale of the Cardinals and a
spin-off-related dividend from Earthgrains.
The company utilizes Securities and Exchange
Commission "shelf" registration statements to provide
flexibility and efficiency when obtaining long-term
financing. At December 31, 1997, a total of $650
million of debt was available for issuance under
existing registrations.
Total long-term debt increased a net $1.09 billion
in 1997 and a net $0.8 million in 1996. The change in
debt during these years is detailed below, by key
[CASH component. Included in the gross reduction in long-term
FLOW debt for 1996 is the noncash conversion of the
FROM company's 8% Convertible Debentures Due 1996.
CONTINUING
OPERATIONS
GRAPH] DEBT ISSUANCES
Debt issuances totaled $1.26 billion in 1997
compared to $773.6 million in 1996, as follows:
------------------------------------------------------
Year Description Amount Interest Rate
(millions)
------------------------------------------------------
1997 Long-Term Notes $250.0 7.1%
Long-Term Notes 250.0 7.125%
Debentures 100.0 6.75%
Dual-Currency Notes 162.8 Floating
Industrial Revenue Bonds 41.0 Various fixed
Commercial Paper, net 436.4 5.5% (avg)
Other, net 29.4 Various fixed
-------------------------------------------------------
1996 Long-Term Notes $450.0 6.75%
Dual-Currency Notes 262.4 Floating
Industrial Revenue Bonds 50.7 Various fixed
Other, net 10.5 Various fixed
-------------------------------------------------------
DEBT REDUCTIONS
Gross debt reduction was $174.9 million in 1997 vs.
$772.8 million in 1996, as follows:
-------------------------------------------------------
Year Description Amount Interest Rate
(millions)
-------------------------------------------------------
1997 Sinking Fund Debentures $83.3 8.625%
Medium-Term Notes 32.5 5.9% (avg)
ESOP Guarantee 33.3 8.3%
Other, net 25.8 Various fixed
-------------------------------------------------------
1996 Sinking Fund Debentures $110.6 Various fixed
Convertible Debentures 166.0 8%
Medium-Term Notes 13.0 7.4% (avg)
Industrial Revenue Bonds 30.0 Various fixed
Commercial Paper, net 417.0 5.3% (avg)
ESOP Guarantee 31.7 8.3%
Other, net 4.5 Various fixed
-------------------------------------------------------
Anheuser-Busch Companies 43
1997 Annual Report
<PAGE> 11
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
In addition to its long-term debt financing,
the company has access to the short-term capital
market through the utilization of commercial paper
and its $1 billion revolving bank credit agreement
which expires August 2001. 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. Fee
information on the credit agreement can be found in
Note 8.
In 1996, the company cancelled all sinking fund
debentures previously held in treasury.
The company's ratio of total debt to total
capitalization was 51.9% and 44.8% at December 31,
1997 and 1996, respectively. The company's fixed
charge coverage ratio was 7.3x, 7.9x and 7.6x for
the years ended December 31, 1997, 1996 and 1995,
respectively.
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. Cash flow from
operating activities is projected to exceed the
funding requirements for these capital investments.
However, the combination of the company's capital [CAPITAL
expenditure program, plus share repurchases and EXPENDITURES/
possible additional investments in international DEPRECIATION
brewers, may require external financing from time & AMORTIZATION
to time. The nature, extent and timing of external GRAPH]
financing will vary depending upon the company's
evaluation of existing market conditions and other
economic factors.
The company has a formal and intensive review
procedure for the authorization of capital
expenditures. The most important measure of
acceptability of a capital project is its projected
discounted cash flow return on investment (DCFROI).
Total capital expenditures in 1997 amounted to $1.2
billion, an increase of $115 million over 1996.
Capital expenditures over the past five years
totaled $4.6 billion.
Capital expenditures for 1997 for the company's
beer/beer-related operations were $1.0 billion,
primarily related to on-going brewery modernizations.
Capital expenditures for entertainment operations
totaled $150.6 million in 1997, principally for new
theme park attractions.
The company expects capital expenditures of
nearly $1.0 billion in 1998. Capital expenditures
during the five-year period 1998-2002 are expected
to approximate $4 billion.
DIVIDENDS
Cash dividends paid to common shareholders
were $492.6 million in 1997 and $458.9 million
in 1996. Dividends on common stock are paid in
the months of March, June, September and December
of each year. In the third quarter 1997, effective
with the September dividend, the Board of Directors
increased the quarterly dividend rate by 8.3%, from
$.24 to $.26 per share. This increased annual
dividends per common share 8.7%, to $1.00 in 1997,
compared with $.92 per common share in 1996. In 1996,
dividends were $.22 per share for the first two
quarters and $.24 per share for the last two quarters.
COMMON STOCK
A discussion of share repurchases and dividends
paid on common stock can be found in Note 15 and
the Dividends section of this discussion, respectively.
At December 31, 1997, common stock shareholders
of record numbered 64,815 compared with 65,079 at
the end of 1996. Total shares outstanding were 487.0
million at December 31, 1997 compared to 497.4 million
at December 31, 1996.
44 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 12
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
PRICE RANGE OF COMMON STOCK
The company's common stock is listed on the New York
Stock Exchange (NYSE) under the symbol BUD. The
following table summarizes quarterly high and low
closing prices on the NYSE.
-------------------------------------------------------
PRICE RANGE OF ANHEUSER-BUSCH COMMON STOCK (BUD)
-------------------------------------------------------
1997 1996
----------------- ----------------
Quarter High Low High Low
First............ 44 7/8 40 5/8 35 5/8 32 5/8
Second........... 44 1/4 41 38 1/4 32 1/2
Third............ 47 7/8 41 13/16 39 7/8 35 3/4
Fourth........... 45 39 1/2 42 7/8 37 3/8
-------------------------------------------------------
[SHAREHOLDERS
EQUITY/ The closing price of the company's common stock at
LONG-TERM December 31, 1997 and 1996 was $44 and $40,
DEBT respectively. The book value of each common share of
GRAPH] stock at December 31, 1997 was $8.30, compared to $8.10
at December 31, 1996.
SHAREHOLDERS EQUITY
Shareholders equity was $4.04 billion at December
31, 1997, compared with $4.03 billion at December 31,
1996 and $4.43 billion at December 31, 1995. The
changes in shareholders equity are detailed in the
Statement of Changes in Shareholders Equity.
In July 1996, the Board of Directors authorized a
two-for-one stock split, effective for shareholders of
record August 15, 1996. Certificates for one additional
share of Anheuser-Busch common stock for each share
held at the record date were distributed to
shareholders on September 12, 1996. All share and per
share information has been adjusted to reflect the
impact of the split.
RISK MANAGEMENT
In the ordinary course of business, Anheuser-Busch
is exposed to foreign currency, interest rate and
commodity price risks. These exposures primarily relate
to the sale of product to foreign customers, purchases
from foreign suppliers, acquisition of raw materials
from both domestic and foreign suppliers, and changes
in interest rates. The company utilizes derivative
financial instruments, including forward exchange
contracts, futures contracts, options and swap
agreements to manage certain of these exposures that it
considers practical to do so. Anheuser-Busch has well
-established policies and procedures governing the use
of derivatives. The company hedges only firm
commitments or anticipated transactions and company
policy prohibits the use of derivatives for
speculation, including the sale of free-standing
options. The company neither holds nor issues financial
instruments for trading purposes.
Specific hedging strategies depend on several
factors, including the magnitude of the exposure,
offset through contract terms, cost and availability of
appropriate instruments, the anticipated time horizon,
basis, opportunity cost and the nature of the item
being hedged. The company's overall risk management
goal is to strike a balance between managing its
exposure to market volatility and obtaining the most
favorable transaction costs possible within the
constraints of its financial objectives. Exposures the
company currently is unable to hedge, or has elected
not to hedge, primarily relate to its floating-rate
debt, "to-arrive" inventory purchase contracts, net
investments in foreign-currency-denominated operations
and translated earnings of foreign subsidiaries.
Anheuser-Busch Companies 45
1997 Annual Report
<PAGE> 13
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
Derivatives are either exchange-traded
instruments which are highly liquid, or
over-the-counter instruments transacted with
highly-rated financial institutions. No credit
loss is anticipated, as the counterparties to
over-the-counter instruments have long-term
debt ratings from Standard and Poor's or Moody's
no lower than A+ or A1, respectively, or the
position is secured by a letter of credit from
a bank having a similar rating. The fair value
of derivative financial instruments is monitored
based on the estimated amounts the company would
receive or have to pay when terminating the
contracts. The company also monitors the
effectiveness of its hedging structures on an
on-going basis.
Following is a volatility analysis of the
company's derivatives portfolio which indicates
potential changes in the fair value of the
company's derivative holdings under certain market
movements. The company applies sensitivity analysis
for commodity price exposures and value-at-risk
(VAR) analysis for foreign currency and interest
rate exposures.
ESTIMATED FAIR VALUE VOLATILITY AT DECEMBER 31, 1997
(IN MILLIONS)
- ----------------------------------------------------
Foreign Currency Risk (VAR):
Forwards, Options......................$ (0.7)
Interest Rate Risk (VAR):
Swaps..................................$ (2.2)
Commodity Price Risk (Sensitivity):
Futures, Swaps, Options................$(15.9)
- ----------------------------------------------------
The sensitivity analysis for commodities reflects
the impact of a hypothetical 10% adverse change in
the market price for the company's principal
commodities. In actuality, commodity price volatility
is dependent on many factors impacting supply and
demand that are impossible to forecast. Therefore,
changes in fair value over time could differ
substantially from the hypothetical change shown above.
VAR forecasts fair value changes using a statistical
model (Monte Carlo simulation method for currencies and
covariance method for interest rates) which incorporates
historical correlations among various currencies and
interest rates. The VAR model assumes the company could
liquidate its currency and interest rate positions in a
single day (one-day holding period). The volatility
amount provided represents the maximum one-day loss each
portfolio could experience for 19 out of every 20 trading
days (95% confidence level).
The preceding volatility analysis ignores changes in
the exposures inherent in the underlying hedged
transactions. Because the company does not hold or trade
derivatives for speculation or profit, all changes in
derivative values are effectively offset by corresponding
changes in the underlying exposures. See Note 4 for
additional information.
BUSINESS INVESTMENTS
Anheuser-Busch made several strategic business
investments in 1997, 1996 and 1995. A summary of current
issues related to those investments is presented below.
See Note 2 for additional information.
GRUPO MODELO
In 1993, the company purchased a 17.7% direct and
indirect interest in Diblo, the operating subsidiary
of Grupo Modelo, Mexico's largest brewer. In May 1997,
the company completed the purchase of an additional 25%
interest in Grupo Modelo and now holds a 37% direct and
indirect interest in Diblo.
In June 1997, the company exercised its option to
purchase an additional 13.2% of Diblo for $550 million,
which will result in Anheuser-Busch holding a 50.2%
direct and indirect interest in Diblo when completed.
Due diligence is complete and Anheuser-Busch and the
controlling shareholders of Grupo Modelo are pursuing
arbitration to resolve a dispute concerning the purchase
price for the option shares.
46 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 14
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
The company accounted for its investment in Grupo
Modelo on the cost basis in 1996 and 1995. Due to the
structure and composition of Anheuser-Busch's initial
investment, the company was not required to adjust its
Grupo Modelo investment to fair market value while on
the cost basis. Additionally, the initial investment
was configured such that the company's return was
largely protected against devaluation of the peso.
Therefore, the 1994 peso devaluation and subsequent
depreciation relative to the U.S. dollar did not have a
significant effect on the carrying value of the
investment in 1996 or 1995.
The company adopted the equity method of accounting
in the second quarter 1997 commensurate with the
increase in ownership to 37% and obtaining additional
minority rights and representation on the Grupo Modelo
Board of Directors. At that time, the company adjusted
the carrying value of its Modelo investment by $189.4
million to reflect the impact of cumulative peso
depreciation during the period for which the investment
was accounted for under the cost method of accounting
(1993 through 1996). The offset to this translation
adjustment is included in the "Foreign Currency
Translation Adjustment" line item in the Shareholders
Equity section of the Consolidated Balance Sheet.
ANTARCTICA
In April 1996, the company purchased a 5% equity
stake in Antarctica Empreendimentos e Participacoes
(ANEP), a subsidiary controlling 75% of the operations
of Companhia Antarctica Paulista (Antarctica), one of
Brazil's leading brewers. The investment agreement also
provided the company with options allowing it to
increase its investment to approximately 30% of ANEP
beginning April 22, 1996 and generally expiring on
April 21, 2002.
In December 1997, the Brazilian trade commission
(CADE), which in July 1997 originally ruled against
Anheuser-Busch's partnership with Antarctica as a
restraint of trade and called for the company to divest
its investment in ANEP, revised its position and ruled
the partnership to be valid, subject to certain
conditions being met. The company is currently holding
discussions with CADE regarding the ruling.
STAG BREWERY
In April 1995, the company entered into a joint
venture with Scottish Courage Ltd. (formerly Courage
Ltd.) which consolidated the brewing and packaging of
Budweiser, primarily for the United Kingdom market, at
the Stag Brewery in London, England. Anheuser-Busch
owned a 50% share in the joint venture, which was
accounted for on the equity basis in 1996 and 1995.
In July 1997, the company purchased the remaining
50% of the joint venture. Under the agreement, Scottish
Courage will retain ownership of the brewery. Anheuser
-Busch will lease the site, operate the brewery and
have control over future capital investments. The Stag
operation is now consolidated.
Anheuser-Busch Companies 47
1997 Annual Report
<PAGE> 15
MANAGEMENT'S DISCUSSION & ANALYSIS
OF OPERATIONS & FINANCIAL CONDITION
CORPORATE MATTERS
JUSTICE DEPARTMENT INQUIRY
In October 1997, the company received
notification from the Justice Department that
the Department had begun a civil investigation
into the distribution and sale of beer, including
Anheuser-Busch's policies and practices in marketing
and distribution. Anheuser-Busch is cooperating
fully with the investigation and is unable at this
time to determine what, if any, impact this
investigation will have on the company's operations.
LABOR NEGOTIATIONS
The existing contract with the Teamsters union
covering hourly production workers at U.S. breweries
expires on February 28, 1998. As a standard contingency,
the company is building wholesaler inventories. The
company is fully prepared to operate should it be
necessary, but does not expect a strike. The contingency
inventory increase is likely to result in above-trend
volume performance in the first quarter.
WHOLESALER EQUITY AGREEMENT
In the second quarter 1997, the company implemented
an amended wholesaler equity agreement with its family
of independent wholesalers. The amended agreement, which
is the result of a joint effort between Anheuser-Busch
and its wholesalers, better addresses the active involvement
of wholesalers in their markets and updates wholesaler
performance standards to reflect the competitive situation
in today's beer business.
ENVIRONMENTAL MATTERS
The company is subject to federal, state and
local environmental protection laws and regulations
and is operating within such laws or is taking action
aimed at assuring compliance with such laws and regulations.
Compliance with these laws and regulations is not expected
to materially affect the company's competitive position.
None of the Environmental Protection Agency (EPA) designated
clean-up sites for which Anheuser-Busch has been identified
as a Potentially Responsible Party (PRP) would have a material
impact on the company's consolidated financial statements.
The company is strongly committed to environmental
protection. Its Environmental Management System provides
specific guidance for how the environment must be factored
into business decisions and mandates special consideration
of environmental issues in conjunction with other business
issues when any of the company's facilities or business
units plans capital projects or changes in processes.
48 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
The management of Anheuser-Busch Companies, Inc. is
responsible for the financial statements and other
information included in this annual report. These
statements are prepared in accordance with generally
accepted accounting principles.
The company maintains accounting and reporting
systems, supported by a system of internal accounting
control, which management believes are adequate to
provide reasonable assurances that assets are
safeguarded against loss from unauthorized use or
disposition and financial records are reliable for
preparing financial statements. During 1997, the
company's internal auditors, in conjunction with Price
Waterhouse LLP, the company's independent accountants,
performed a comprehensive review of the adequacy of the
company's internal accounting control system. Based on
that comprehensive review, it is management's opinion
that the company has an effective system of internal
accounting control.
The Audit Committee of the Board of Directors, which
consists of eight nonmanagement directors, oversees the
company's financial reporting and internal control
systems, recommends selection of the company's
independent accountants and meets with the independent
accountants and internal auditors to review the overall
scope and specific plans for their respective audits.
The Committee held four meetings during 1997. A more
complete description of the functions performed by the
Audit Committee can be found in the company's proxy
statement.
The report of Price Waterhouse LLP appears below.
-------------------------------------------------------
PRICE WATERHOUSE LLP
800 Market Street - St. Louis, MO 63101
February 3, 1998 [LOGO]
To the Shareholders and Board of Directors
of Anheuser-Busch Companies, Inc.
We have audited the accompanying Consolidated
Balance Sheet of Anheuser-Busch Companies, Inc. and its
subsidiaries as of December 31, 1997 and 1996, and the
related Consolidated Statements of Income, Changes in
Shareholders Equity and Cash Flows for each of the
three years in the period ended December 31, 1997.
These financial statements are the responsibility of
the company's management. Our responsibility is to
express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the Consolidated Financial
Statements audited by us present fairly, in all
material respects, the financial position of Anheuser
-Busch Companies, Inc. and its subsidiaries at December
31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with
generally accepted accounting principles.
As discussed in Note 2 and Note 3 to the
Consolidated Financial Statements, in 1997 the company
adopted the equity method of accounting for its
investments in Grupo Modelo, S.A. de C.V. and its
operating subsidiary, Diblo, S.A. de C.V. and changed
its method of accounting for business process
reengineering costs incurred in connection with
information technology transformation projects,
respectively.
PRICE WATERHOUSE LLP
Anheuser-Busch Companies 49
1997 Annual Report
<PAGE> 17
CONSOLIDATED BALANCE SHEET
Anheuser-Busch Companies and Subsidiaries
(In millions)
- -----------------------------------------------------------------
DECEMBER 31, 1997 1996
- -----------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and marketable securities............$ 147.3 $ 93.6
Accounts and notes receivable, less
allowance for doubtful accounts of
$4.9 and $3.1 in 1997 and 1996.......... 713.4 632.7
Inventories:
Raw materials and supplies.............. 328.7 319.5
Work in process......................... 87.8 80.6
Finished goods.......................... 133.7 131.0
Total inventories..................... 550.2 531.1
Other current assets...................... 173.0 208.4
---------------------
Total current assets.................... 1,583.9 1,465.8
INVESTMENTS IN AFFILIATED COMPANIES 1,296.8 741.2
OTHER ASSETS................................ 1,095.8 1,048.4
PLANT AND EQUIPMENT, NET.................... 7,750.6 7,208.2
---------------------
Total Assets............................$11,727.1 $10,463.6
=====================
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES:
Accounts payable..........................$ 791.8 $ 726.8
Accrued salaries, wages and benefits...... 224.3 227.6
Accrued taxes............................. 183.9 233.0
Other current liabilities................. 300.7 243.5
--------------------
Total current liabilities............... 1,500.7 1,430.9
--------------------
POSTRETIREMENT BENEFITS..................... 525.4 524.6
--------------------
LONG-TERM DEBT.............................. 4,365.6 3,270.9
--------------------
DEFERRED INCOME TAXES....................... 1,293.6 1,208.1
--------------------
COMMON STOCK AND OTHER SHAREHOLDERS EQUITY:
Common stock, $1.00 par value, authorized
800,000,000 shares...................... 709.3 705.8
Capital in excess of par value............ 1,017.0 929.2
Retained earnings......................... 7,604.9 6,924.5
Foreign currency translation adjustment... (214.0) (8.8)
--------------------
9,117.2 8,550.7
Treasury stock, at cost................... (4,793.3) (4,206.2)
ESOP debt guarantee....................... (282.1) (315.4)
--------------------
4,041.8 4,029.1
--------------------
COMMITMENTS AND CONTINGENCIES...............
Total Liabilities and Equity............$11,727.1 $10,463.6
====================
- ----------------------------------------------------------------
The company's financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements appearing on
pages 54-73 of this report.
50 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 18
Consolidated Statement of Income
Anheuser-Busch Companies and Subsidiaries
(In millions, except per share)
- ----------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------------
Sales...........................$ 12,832.4 $12,621.5 $12,004.5
Less excise taxes............. 1,766.2 1,737.8 1,664.0
--------------------------------
Net sales....................... 11,066.2 10,883.7 10,340.5
Cost of products and services. 7,096.9 6,964.6 6,791.0
--------------------------------
Gross profit.................... 3,969.3 3,919.1 3,549.5
Marketing, distribution and
administrative expenses..... 1,916.3 1,890.0 1,756.6
Gain on sale of St. Louis
Cardinals.................. - 54.7 -
Shutdown of Tampa brewery..... - - (160.0)
--------------------------------
Operating income................ 2,053.0 2,083.8 1,632.9
Interest expense.............. (261.2) (232.8) (225.9)
Interest capitalized.......... 42.1 35.5 24.3
Interest income............... 7.9 9.4 9.9
Other income/(expense), net... (9.3) (3.0) 20.5
--------------------------------
Income before income taxes...... 1,832.5 1,892.9 1,461.7
--------------------------------
Provision for income taxes:
Current....................... 612.2 643.0 523.8
Deferred...................... 91.4 93.8 51.3
--------------------------------
703.6 736.8 575.1
Equity income, net of tax....... 50.3 - -
--------------------------------
Income from continuing operations 1,179.2 1,156.1 886.6
Income/(Loss) from discontinued
operations................... - 33.8 (244.3)
--------------------------------
Income before cumulative effect
of accounting change.......... 1,179.2 1,189.9 642.3
Cumulative effect of accounting
change, net of tax of $6.2.... (10.0) - -
--------------------------------
NET INCOME......................$ 1,169.2 $ 1,189.9 $ 642.3
================================
BASIC EARNINGS PER SHARE:
Continuing operations.........$ 2.39 $ 2.31 $ 1.73
Discontinued operations....... - .07 (.47)
--------------------------------
Income before cumulative
effect of accounting change. 2.39 2.38 1.26
Cumulative effect of
accounting change........... (.02) - -
--------------------------------
Net income....................$ 2.37 $ 2.38 $ 1.26
================================
DILUTED EARNINGS PER SHARE:
Continuing operations.........$ 2.36 $ 2.27 $ 1.71
Discontinued operations....... - .07 (.47)
--------------------------------
Income before cumulative
effect of accounting change. 2.36 2.34 1.24
Cumulative effect of
accounting change........... (.02) - -
--------------------------------
Net income....................$ 2.34 $ 2.34 $ 1.24
================================
- ----------------------------------------------------------------
The company's financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements appearing on
pages 54-73 of this report.
Anheuser-Busch Companies 51
1997 Annual Report
<PAGE> 19
CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS EQUITY
Anheuser-Busch Companies and Subsidiaries
<TABLE>
<CAPTION>
(In millions, except per share)
- --------------------------------------------------------------------------------------
Foreign
Capital in ESOP Currency
Common Excess of Retained Treasury Debt Translation
Stock Par Value Earnings Stock Guarantee Adjustment
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 $343.8 $ 856.8 $ 6,656.7 $ (3,042.6) $ (377.4) $(21.8)
Net income..................... 642.3
Common dividends paid
($0.84 per share)............ (429.5)
Shares issued under stock
plans and conversions
of convertible debentures.... 3.5 155.4 .1
Reduction of ESOP debt......... 30.3
Treasury stock acquired........ (393.4)
Foreign currency translation
adjustment................... 9.7
-------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 347.3 1,012.2 6,869.6 (3,436.0) (347.1) (12.1)
Net income..................... 1,189.9
Common dividends paid
($0.92 per share)............ (458.9)
Shares issued under stock
plans and conversions
of convertible debentures.... 9.0 266.5 3.9
Two-for-one stock split........ 349.5 (349.5)
Reduction of ESOP debt......... 31.7
Treasury stock acquired........ (770.2)
Foreign currency translation
adjustment................... 3.3
Spin-off of
The Earthgrains Company...... (680.0)
--------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 705.8 929.2 6,924.5 (4,206.2) (315.4) (8.8)
Net income..................... 1,169.2
Common dividends paid
($1.00 per share)............ (492.6)
Shares issued under stock plans 3.5 87.8 3.8
Reduction of ESOP debt......... 33.3
Treasury stock acquired........ (587.1)
Foreign currency translation
adjustment................... (205.2)
--------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 $709.3 $1,017.0 $7,604.9 $(4,793.3) $(282.1) $(214.0)
========================================================
</TABLE>
The company's financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements appearing on
pages 54-73 of this report.
52 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 20
CONSOLIDATED STATEMENT OF
CASH FLOWS
Anheuser-Busch Companies and Subsidiaries
<TABLE>
<CAPTION>
(In millions)
- ----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1997 1996 1995
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income.......................................$ 1,169.2 $ 1,189.9 $ 642.3
Discontinued operations.......................... - (33.8) 244.3
Cumulative effect of accounting change........... 10.0 - -
-------------------------------
Income from continuing operations................ 1,179.2 1,156.1 886.6
Adjustments to reconcile income
from continuing operations to
cash provided by operating activities:
Depreciation and amortization................ 683.7 611.5 573.9
Deferred income taxes........................ 91.4 93.8 51.3
Undistributed earnings of affiliated
companies.................................. (49.9) - -
After-tax gain on sale of St. Louis
Cardinals.................................. - (33.4)
Shutdown of Tampa brewery................... - - 112.3
Decrease/(Increase) in noncash
working capital............................ 5.4 233.7 (262.0)
Other, net................................... (93.2) (92.8) 63.8
-------------------------------
Cash provided by operating activities............ 1,816.6 1,968.9 1,425.9
Net cash provided by/(provided to)
discontinued operations.................... - 52.0 (11.0)
-------------------------------
Total cash provided by operating activities...... 1,816.6 2,020.9 1,414.9
-------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital expenditures............................. (1,199.3) (1,084.6) (952.5)
New business acquisitions........................ (683.3) (135.7) (82.9)
Proceeds from sale of St. Louis Cardinals........ - 116.6 -
-------------------------------
Cash used for investing activities............... (1,882.6) (1,103.7) (1,035.4)
-------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in long-term debt....................... 1,245.9 773.6 597.6
Decrease in long-term debt....................... (141.6) (575.1) (296.4)
Dividends paid to shareholders................... (492.6) (458.9) (429.5)
Acquisition of treasury stock.................... (587.1) (770.2) (393.4)
Shares issued under stock plans.................. 95.1 113.4 91.8
-------------------------------
Cash provided by/(used for) financing activities. 119.7 (917.2) (429.9)
-------------------------------
Net increase/(decrease) in cash and
marketable securities during the year............ 53.7 - (50.4)
Cash and marketable securities, beginning of year.. 93.6 93.6 144.0
-------------------------------
Cash and marketable securities, end of year........$ 147.3 $ 93.6 $ 93.6
===============================
- ----------------------------------------------------------------------------------
</TABLE>
The company's financial statements should be read in conjunction
with the Notes to Consolidated Financial Statements appearing on
pages 54-73 of this report.
Anheuser-Busch Companies 53
1997 Annual Report
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES AND POLICIES
This summary of the significant accounting principles
and policies of Anheuser-Busch Companies, Inc. and its
subsidiaries is presented to assist in evaluating the
company s Consolidated Financial Statements included
in this annual report. These principles and policies
conform to generally accepted accounting principles.
The preparation of financial statements in conformity
with generally accepted accounting principles requires
that management make estimates and assumptions which
impact the reported amounts of assets and liabilities
at the date of the financial statements and the reported
amounts of revenues and expenses during the period.
Actual results could differ from those estimates and
assumptions.
PRINCIPLES OF CONSOLIDATION
The Consolidated Financial Statements include the
accounts of the company and all its subsidiaries. The
company generally consolidates all majority-owned
subsidiaries, accounts for equity investments below
the 20% level under the cost method and applies the
equity method of accounting for equity investments
between 20% and 50%. All significant intercompany
transactions have been eliminated. Minority interests
in consolidated subsidiaries are not material.
FOREIGN CURRENCY TRANSLATION
Financial statements of foreign operations where
the local currency is the functional currency are
translated using period-end exchange rates for assets
and liabilities, and weighted average exchange rates
during the period for the results of operations.
Translation adjustments are reported as a separate
component of shareholders equity. Translation practice
differs for foreign operations in hyperinflationary
economies. See Note 2 for additional discussion.
Exchange rate adjustments related to foreign currency
transactions are recognized in income as incurred.
CASH AND MARKETABLE SECURITIES
Cash and marketable securities include cash on
hand, demand deposits and short-term investments
with initial maturities generally of 90 days or less.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED BUSINESSES (GOODWILL)
The excess of the cost over the net assets of
acquired businesses, which is included in Other Assets
on the Consolidated Balance Sheet, is amortized on a
straight-line basis over a period of 40 years. Accumulated
amortization at December 31, 1997 and 1996 was $106.6
million and $93.7 million, respectively. The on-going
recoverability of goodwill is monitored based on analysis
of appropriate operating unit performance and consideration
of significant events or changes in the overall business
environment.
INVENTORIES AND PRODUCTION COSTS
Inventories are valued at the lower of cost or market.
Cost is determined under the last-in, first-out method
(LIFO) for approximately 75% and 76%, respectively, of
total inventories at December 31, 1997 and 1996. Had the
average-cost method (which approximates replacement cost)
been used with respect to such inventories at December 31,
1997 and 1996, total inventories would have been $117.5
million and $124.3 million higher, respectively.
PLANT AND EQUIPMENT
Plant and equipment is carried at cost and includes
expenditures for new facilities and expenditures which
substantially increase the useful lives of existing
facilities. The cost of maintenance, repairs and minor
renewals is expensed as incurred. When plant and equipment
are retired or otherwise disposed, the related cost and
accumulated depreciation are eliminated and any gain or
loss on disposition is recognized in earnings.
Depreciation is provided on the straight-line method
over the estimated useful lives of the assets, resulting
in annual depreciation rates on buildings ranging from 2%
to 10% and on machinery and equipment ranging from 4% to 25%.
54 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
The provision for income taxes is based on income
and expense amounts as reported in the Consolidated
Statement of Income. The company utilizes certain
provisions of federal income tax laws and regulations
to reduce current taxes payable. Deferred income taxes
are recognized for the effect of temporary differences
between financial and tax reporting in accordance with
the requirements of FAS No. 109, "Accounting for Income
Taxes."
DERIVATIVE FINANCIAL INSTRUMENTS
All derivative instruments held by the company are
designated as hedges, have high correlation with the
underlying exposure and are highly effective in
offsetting underlying price movements. Accordingly,
gains and losses from changes in derivative fair values
are deferred. Gains or losses upon settlement of
derivative positions when the underlying transaction
occurs are recognized in the income statement or
recorded as part of the underlying asset or liability,
as appropriate depending on the circumstances. Gains
and losses upon settlement of derivative positions
because the underlying transaction is no longer
expected to occur are recognized in earnings in the
period incurred. Option premiums paid are recorded as
assets and amortized over the life of the option.
Excluding certain interest rate swaps, derivatives
generally have initial terms of less than two years and
all currently hedged transactions are expected to occur
within the next two years. See Note 4 for additional
information.
RESEARCH AND DEVELOPMENT COSTS, ADVERTISING AND
PROMOTIONAL COSTS, AND INITIAL PLANT COSTS
Research and development costs, advertising and
promotional costs, and initial plant costs are expensed
in the year in which these costs are incurred.
Advertising and promotional expenses were $603.6
million, $701.3 million and $683.0 million in 1997,
1996 and 1995, respectively.
EARNINGS PER SHARE
Basic earnings per share are based on the weighted
average number of shares of common stock outstanding
during the year. Diluted earnings per share are based
on the weighted average number of shares of common
stock and common stock equivalents outstanding during
the year. See Note 17 for additional information.
SYSTEMS DEVELOPMENT COSTS
The company capitalizes certain systems development
costs that meet established criteria. Amounts
capitalized are amortized to expense over a five-year
period. In 1997, 1996 and 1995, the company capitalized
systems development costs of $32.6 million, $83.0
million, and $43.7 million, respectively. Accumulated
amortization related to capitalized systems costs was
$59.4 million and $25.8 million at December 31, 1997
and 1996, respectively.
STOCK-BASED COMPENSATION
The company accounts for employee stock options in
accordance with Accounting Principles Board Opinion No.
25 (APB 25), "Accounting for Stock Issued to
Employees." Under APB 25, the company applies the
intrinsic value method of accounting and therefore does
not recognize compensation expense for options granted,
because options are only granted at a price equal to
the market price on the day of grant.
During 1996, FAS No. 123, "Accounting for Stock
-Based Compensation," became effective for the company.
FAS 123 prescribes the recognition of compensation
expense based on the fair value of options as
determined on the grant date. However, FAS 123 allows
companies to continue applying APB 25 if certain pro
forma disclosures are made assuming hypothetical fair
value method application. See Note 5 for additional
information.
Anheuser-Busch Companies 55
1997 Annual Report
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
2. BUSINESS INVESTMENTS
In 1993, Anheuser-Busch purchased a 17.7% 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, for $477 million. In May 1997, the company
increased its direct and indirect equity ownership
in Diblo to 37% for an additional $605 million.
Effective with the increase in equity ownership to 37%,
the company received expanded minority rights, increased
its representation on Modelo's Board of Directors to 10
of 21 members and adopted the equity method of accounting
for its investment. Equity income recognized in 1997
reflects the company s 17.7% ownership from January
through May and its 37% ownership thereafter. The
difference between income recognized on the cost basis
in prior years and what would have been recognized had
the company applied equity accounting in those years is
not material. Included in the carrying amount of the
Modelo investment is goodwill of $246.3 million, which
is being amortized over 40 years. Dividends received
from Grupo Modelo in 1997 totaled $16.4 million.
In June 1997, the company exercised its remaining
option to purchase an additional 13.2% equity interest
in Diblo for $550 million. Due diligence is complete
and the company and the controlling shareholders of
Grupo Modelo are pursuing arbitration to resolve a
dispute concerning the purchase price for the option
shares. When completed, the company will own a 50.2%
direct and indirect interest in Diblo. However, the
company will not have voting control and will therefore
continue to account for its Modelo investment on the
equity basis.
For foreign operations in countries whose economies
are considered highly inflationary (cumulative three-year
inflation in excess of 100%, therefore the U.S. dollar
is deemed the functional currency), currency translation
practice in accordance with FAS No. 52, "Foreign Currency
Translation," requires that property, other long-lived
assets, long-term liabilities and related profit and loss
accounts be translated at historical rates of exchange.
Also, net monetary asset and liability related translation
adjustments are included in earnings for operations in
highly inflationary economies. Effective January 1, 1997,
Mexico's economy was deemed highly inflationary for
accounting purposes under FAS 52 and, accordingly, all
monetary translation gains and losses related to the
Modelo and Diblo investments will be recognized in equity
income until the hyperinflationary period ends.
Summary financial information for Grupo Modelo is
presented below (in millions). The amounts presented
are implied consolidated Grupo Modelo operating results
and financial position adjusted as necessary to account
for differences between Mexican and U.S. generally
accepted accounting principles, and reflect Anheuser-
Busch's appropriate pro rata equity interest during
the year.
- -------------------------------------------------------
1997
----------
Current assets............................... $ 856.7
Noncurrent assets............................ 2,297.5
Current liabilities.......................... 176.0
Noncurrent liabilities....................... 58.2
Gross sales.................................. 1,353.6
Net sales.................................... 1,268.2
Gross profit................................. 594.6
Minority interest............................ 26.6
Income from continuing operations............ 138.0
Net income................................... 138.0
- ------------------------------------------------------
56 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 1996, the company invested $52.5 million to
purchase a 5% equity stake in Antarctica
Empreendimentos e Participacoes (ANEP), a subsidiary
controlling approximately 75% of the operations of
Companhia Antarctica Paulista (Antarctica), one of
Brazil's leading brewers. As a result of holding
certain minority rights and having gained
representation on the ANEP Board of Directors in late
1996, the company changed its accounting method for the
investment in ANEP from the cost to the equity method
effective January 1, 1997. The difference between
income recognized on the cost basis in 1996 and what
would have been recognized had the company applied
equity accounting is not material. The company also
owns a 51% interest in, and operates a joint venture
with, Antarctica for the marketing, sales and
distribution of Budweiser in Brazil. The joint venture,
Budweiser Brasil Ltda., is consolidated.
In February 1996, the company entered into a brewing
and distribution alliance with Compania Cervecerias
Unidas S.A. (CCU) and Buenos Aires Embotelladora S.A.
(BAESA) and purchased a 4.4% stake in CCU-Argentina,
CCU's Argentine brewing subsidiary, for $4 million in
combined cash and equipment. The investment in CCU
-Argentina is accounted for on the cost basis.
The company owns an 86.6% interest in a joint
venture which owns the Wuhan brewery located in the
People's Republic of China (China). The joint venture
brews and distributes Budweiser primarily in the
northern, eastern and central regions of China. The
Wuhan joint venture is consolidated.
In 1997, the company purchased the remaining 50% of
the Stag Brewing Company Ltd. (SBCL) from its partner
Scottish Courage. Budweiser is brewed and packaged at
the Stag Brewery primarily for distribution in the
United Kingdom. Scottish Courage owns and leases the
brewery site to SBCL. The company's investment in SBCL
is now consolidated.
In 1997 the company purchased a 30.9% equity stake
in Widmer Bros. Brewing of Portland, Ore. Widmer
products are distributed exclusively through Anheuser
-Busch wholesalers in substantially all major U.S.
markets. The company accounts for this investment under
the equity method.
-------------------------------------------------------
3. CHANGE IN ACCOUNTING PRINCIPLE
In November 1997, the Emerging Issues Task Force
(EITF) of the Financial Accounting Standards Board
released consensus No. 97-13, "Accounting for Costs
Incurred in Connection with a Consulting Project or an
Internal Project That Combines Business Process
Reengineering and Information Technology
Transformation." The EITF consensus specifically
defined systems reengineering costs and mandated such
costs be expensed as incurred. Additionally, any
systems reengineering costs previously capitalized and
unamortized were to be immediately charged against
earnings.
In accordance with the EITF consensus, the company
recorded a $10 million after-tax charge ($.02 per
share) for capitalized systems reengineering costs in
the fourth quarter 1997. The charge is shown as a
separate cumulative effect of accounting change line
item in the Consolidated Statement of Income.
Prospectively, the company will expense all such costs
as incurred.
Anheuser-Busch Companies 57
1997 Annual Report
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
4. FINANCIAL INSTRUMENTS
The company currently uses the following derivative financial
instruments: purchased options and forward contracts for foreign
currency risk; swaps for interest rate risk; and futures, swaps
and purchased options for commodity price risk. All derivatives
are off-balance-sheet and therefore have no carrying value.
Because the company hedges only with instruments that have high
correlation with the underlying transaction pricing, changes in
derivatives fair value are expected to be offset by changes in
pricing.
The following table summarizes the underlying notional
transaction amounts and fair values for outstanding
derivatives, by risk category and instrument type, at
December 31 (in millions):
- ----------------------------------------------------------------
1997 1996
-------------------------------
Notional Fair Notional Fair
Amount Value Amount Value
-------------------------------
Foreign Currency:
Forwards...................... $ 75.7 $ (1.1) $ 35.3 $ .2
Options....................... 265.5 15.3 209.2 9.9
------------------------------
341.2 14.2 244.5 10.1
------------------------------
Interest Rate:
Swaps......................... 425.2 (49.8) 487.4 (12.5)
-------------------------------
Commodity Price:
Swaps......................... 140.5 (2.9) 105.2 5.7
Futures....................... 22.9 (.4) 37.1 2.5
Options....................... 5.6 68.3 (1.5)
-------------------------------
169.0 (3.3) 210.6 6.7
-------------------------------
Total of outstanding derivatives $935.4 $(38.9) $942.5 $ 4.3
===============================
- -----------------------------------------------------------------
The interest rate swap and currency exchange agreements
related to the dual-currency notes discussed in Note 8 are
included as interest rate swaps in the preceding table. These
agreements are entered into as an integral part of an overall
structure with the dual-currency notes to provide the company
with floating-rate financing at rates below market rates for
commercial paper.
Because the company has operations in Japan and the United
Kingdom, it has "long" exposure to the yen and the pound,
respectively. The company s exposures to other currencies are
essentially "short," primarily for the German mark. Long
indicates the company has foreign currency in excess of its
needs while short indicates the company requires additional
foreign currency to meet its needs. For commodity derivatives,
as a net user of raw materials, the company's underlying
exposure is naturally short, indicating additional quantities
must be obtained to meet anticipated production requirements.
CONCENTRATION OF CREDIT RISK
The company does not have a material concentration of
accounts receivable or other credit risk.
NONDERIVATIVE FINANCIAL INSTRUMENTS
Nonderivative financial instruments included in the
Consolidated Balance Sheet are cash, commercial paper and
long-term debt. The fair value of long-term debt, based on
future cash flows discounted at interest rates currently
available to the company for debt with similar maturities
and characteristics, was $4.5 billion and $3.4 billion at
December 31, 1997 and 1996, respectively.
58 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------
5. STOCK OPTION PLANS
Under terms of the company's incentive stock option
plans, officers and certain other employees may be
granted options to purchase the company's common stock
at no less than 100% of the market price on the date
the option is granted. Options generally vest over
three years and have a maximum term of 10 years. At
December 31, 1997, 1996 and 1995, a total of 27
million, 31 million and 36.1 million shares,
respectively, were reserved for future issuance under
the plans. Certain of the plans also provide for the
granting of stock appreciation rights (SARs) in tandem
with stock options. The exercise of an SAR cancels the
related option and the exercise of an option cancels
the related SAR. There were no SARs outstanding under
the plans at December 31, 1997 and 1996.
Had compensation expense for the company's stock
options been recognized based on the fair value on the
grant date under the methodology prescribed by FAS 123,
the company's income from continuing operations and
earnings per share for the years ended December 31,
1997 and 1996 would have been impacted as shown in the
following table (in millions, except per share). The
pro forma results shown below reflect only the impact
of options granted in 1996 and 1995. Because options
are granted at the end of the year, there is no pro
forma impact for 1995. The pro forma impact is expected
to increase in 1998 and then remain relatively constant
thereafter, absent significant changes to valuation
assumptions or option grant patterns.
------------------------------------------------------
1997 1996
-----------------
Reported income from continuing
operations.........................$1,179.2 $1,156.1
Pro forma income from continuing
operations......................... 1,165.0 1,149.0
Reported diluted earnings per
share from continuing operations... 2.36 2.27
Pro forma diluted earnings per
share from continuing operations... 2.33 2.26
-------------------------------------------------------
The fair value of options granted (which is
amortized to expense over the option vesting period in
determining the pro forma impact), is estimated on the
date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions:
-------------------------------------------------------
1997 1996 1995
----------------------
Expected life of option......... 5 yrs. 5 yrs. 5 yrs.
Risk-free interest rate......... 5.7% 6.2% 5.5%
Expected volatility of
Anheuser-Busch stock......... 15% 15% 15%
Expected dividend yield on
Anheuser-Busch stock......... 2.3% 2.3% 2.5%
-------------------------------------------------------
The weighted average fair value of options granted
during 1997, 1996 and 1995 is as follows:
-------------------------------------------------------
1997 1996 1995
--------------------
Fair value of each option granted.. $8.37 $8.30 $5.98
Total number of options granted
(in millions).................... 5.6 4.1 5.8
--------------------
Total fair value of all options
granted (in millions)............$46.9 $34.0 $34.7
====================
-------------------------------------------------------
In accordance with FAS 123, the weighted average
fair value of stock options granted is required to be
based on a theoretical statistical model using the
preceding Black-Scholes assumptions. In actuality,
because the company's incentive stock options are not
traded on any exchange, employees can receive no value
nor derive any benefit from holding stock options under
these plans without an increase in the market price of
Anheuser-Busch stock. Such an increase in stock price
would benefit all stockholders commensurately.
Anheuser-Busch Companies 59
1997 Annual Report
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Presented below is a summary of stock option plans activity
for the years shown:
- -----------------------------------------------------------------
Wtd. Avg. Wtd. Avg.
Exercise Options Exercise
Options Price Exercisable Price
------- ----- ----------- -----
BALANCE, DECEMBER 31, 1994 24,871,180 $22.37
Granted................. 5,779,850 32.33
Exercised............... (5,051,464) 18.59
Cancelled............... (306,688) 25.79
-----------
BALANCE, DECEMBER 31, 1995 25,292,878 $25.36 15,259,418 $22.93
Granted................. 4,149,588 40.59
Exercised............... (4,945,152) 22.37
Cancelled............... (176,650) 28.22
-----------
BALANCE, DECEMBER 31, 1996 24,320,664 $28.55 15,234,258 $24.67
Granted................. 5,557,073 43.37
Exercised............... (3,971,384) 22.48
Cancelled............... (185,377) 35.11
-----------
BALANCE, DECEMBER 31, 1997 25,720,976 $32.64 15,908,186 $27.69
=====================================
- -----------------------------------------------------------------
The following table summarizes information for options
currently outstanding and exercisable at December 31, 1997:
- -----------------------------------------------------------------
Options Outstanding Options Exercisable
----------------------------- --------------------
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Range of Remaining Exercise Exercise
Prices Number Life Price Number Price
- ------ ------ ---- ----- ------ -----
$15-26 7,946,134 5 yrs $22.71 7,946,134 $22.71
27-37 8,223,126 7 yrs 31.08 6,450,272 30.73
38-45 9,551,716 9 yrs 42.25 1,511,780 40.90
--------- ---------
$15-45 25,720,976 7 yrs $32.64 15,908,186 $27.69
=============================================================
- -------------------------------------------------------------
Option quantities and prices have been adjusted for the
impact of the Earthgrains spin-off and the two-for-one stock
split in September 1996.
The company's stock option plans provide for acceleration
of exercisability of the options upon the occurrence of certain
events relating to a change of control, merger, sale of assets
or liquidation of the company (Acceleration Events). Certain
of the plans also provide that optionees may be granted Limited
Stock Appreciation Rights (LSARs). LSARs become exercisable,
in lieu of an option, upon the occurrence, at least six months
following the date of grant, of an Acceleration Event. The LSARs
entitle the holder to a cash payment per share equivalent to the
excess of the share value (under terms of the LSAR) over the
grant price. As of December 31, 1997 and 1996, there were .4
million and 1.0 million, respectively, of LSARs outstanding.
60 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------
6. EMPLOYEE STOCK OWNERSHIP PLANS
In 1989, the company added Employee Stock Ownership
Plans (ESOPs) to its existing Deferred Income Stock
Purchase and Savings Plans. 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 8.3% and used the proceeds to
buy approximately 22.7 million shares of common stock
from the company at market price. The debt is
guaranteed by the company and the shares are being
allocated to participants over 15 years as
contributions are made to the plans.
ESOP cash contributions and expense accrued during
the calendar year are determined by several factors,
including the market price and number of shares
allocated to participants, debt service, dividends on
unallocated shares and the company's matching
contribution. Over the 15-year life of the ESOPs, total
expense recognized will equal total cash contributions
made by the company.
ESOP cash contributions are made in March and
September in accordance with debt service requirements.
A summary of cash contributions and dividends on
unallocated ESOP shares for the three years ended
December 31 is presented below (in millions):
-------------------------------------------------------
1997 1996 1995
--------------------------
Cash contributions........ $ 15.2 $21.8 $45.8
==========================
Dividends................. $ 9.9 $10.4 $10.8
==========================
-------------------------------------------------------
Total ESOP expense is allocated to operating expense
and interest expense based on the ratio of principal
and interest payments on the debt. Total ESOP expense
for the three years ended December 31 is presented
below (in millions):
-------------------------------------------------------
1997 1996 1995
--------------------------
Operating expense........... $ 8.6 $14.3 $19.6
Interest expense............ 6.7 11.6 18.0
-------------------------
Total expense............... $15.3 $25.9 $37.6
=========================
-------------------------------------------------------
7. RETIREMENT BENEFITS
PENSION PLANS
The company has pension plans covering substantially
all of its regular employees. Total pension expense for
the three years ended December 31 is presented below
(in millions):
-------------------------------------------------------
1997 1996 1995
-----------------
Single-employer defined benefit plans $12.0 $18.6 $29.6
Multi-employer plans................. 13.2 20.2 26.1
Defined contribution plans........... 15.9 18.3 15.0
-----------------
Total pension expense................ $41.1 $57.1 $70.7
=================
-------------------------------------------------------
Net pension expense for single-employer defined
benefit plans was comprised of the following for the
three years ended December 31 (in millions):
-------------------------------------------------------
1997 1996 1995
--------------------
Service cost (benefits earned
during the year).................$ 51.5 $ 49.3 $41.0
Interest cost on projected benefit
obligation....................... 100.7 76.3 64.4
Assumed return on assets...........(141.0)(107.9)(80.6)
Amortization of prior service cost,
actuarial gains/losses and the
excess of market value of plan
assets over projected benefit
obligation at January 1, 1986.... .8 .9 4.8
-------------------
Net pension expense................$ 12.0 $ 18.6 $29.6
===================
------------------------------------------------------
Anheuser-Busch Companies 61
1997 Annual Report
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The key actuarial assumptions used in determining annual
pension expense for single-employer defined benefit plans
were as follows for the three years ended December 31:
- --------------------------------------------------------------
1997 1996 1995
-----------------
Discount rate............................... 7.75% 7.5% 8.0%
Long-term rate of return on plan assets..... 10.0% 10.0% 10.0%
Weighted-average rate of compensation
increase.................................. 5.5% 5.5% 5.5%
- --------------------------------------------------------------
The actual dollar return on pension assets was $396.1
million, $142.3 million and $140.9 million in 1997, 1996
and 1995, respectively.
The following tables set forth the funded status of all
company single-employer defined benefit plans at December 31
(in millions):
- ---------------------------------------------------------------
1997 1996
------------------
Plan assets at fair market value primarily
corporate equity securities and publicly
traded bonds.............................. $1,821.4 $1,237.4
------------------
Accumulated benefit obligation:
Vested benefits........................... (1,138.6) (846.7)
Nonvested benefits........................ (123.1) (84.1)
------------------
Accumulated benefit obligation.............. (1,261.7) (930.8)
Effect of projected compensation increases (166.7) (180.5)
------------------
Projected benefit obligation................ (1,428.4) (1,111.3)
------------------
Plan assets in excess of projected benefit
obligation................................ $ 393.0 $ 126.1
==================
- ---------------------------------------------------------------
Plan assets in excess of projected benefit obligation
consist of the following at December 31:
- -----------------------------------------------------------------
1997 1996
----------------
Unamortized excess of market value of plan
assets over projected benefit obligation at
January 1, 1986 being amortized over 15 years..$ 33.3 $ 40.5
Unrecognized net actuarial gains/(losses)........ 240.8 (7.8)
Prior service costs.............................. (66.2) (73.9)
Prepaid pension.................................. 185.1 167.3
---------------
$393.0 $126.1
===============
- -----------------------------------------------------------------
The assumptions used in determining the funded status of the
plans as of December 31 were as follows:
- -----------------------------------------------------------------
1997 1996
---------------
Discount rate..................................... 7.5% 7.75%
Weighted-average rate of compensation increase.... 4.75% 5.5%
- -----------------------------------------------------------------
Contributions to multi-employer plans in which the company
and its subsidiaries participate are determined in accordance
with the provisions of negotiated labor contracts and are based
on employee hours worked.
62 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides certain health care and life
insurance benefits to eligible retired employees. Most
current participants become eligible for retiree health
care benefits if they accrue 10 years of continuous
service after age 45.
The following table sets forth the accumulated
postretirement benefit obligation (APBO) and the total
postretirement benefit liability for all single
-employer defined benefit plans at December 31 (in
millions):
-------------------------------------------------------
1997 1996
--------------
Retirees................................ $145.0 $125.4
Fully eligible active plan participants. 79.4 77.0
Other active plan participants.......... 94.0 94.2
--------------
Accumulated postretirement benefit
obligation............................ 318.4 296.6
Unrecognized prior service benefits..... 99.6 111.2
Unrecognized net actuarial gains........ 119.4 128.8
--------------
Total postretirement benefit liability.. $537.4 $536.6
==============
-------------------------------------------------------
As of December 31, 1997 and 1996, $12.0 million of
these obligations were classified as current
liabilities and $525.4 million and $524.6 million were
classified as long-term liabilities, respectively.
Net periodic postretirement benefits expense for
single-employer defined benefit plans was comprised of
the following for the three years ended December 31 (in
millions):
-------------------------------------------------------
1997 1996 1995
-------------------
Service cost (benefits attributed
to service during the year)...... $12.0 $17.1 $20.8
Interest cost on accumulated
postretirement benefit obligation 23.2 22.9 23.9
Amortization of prior service
benefit.......................... (11.7) (11.7) (11.8)
Amortization of actuarial gains.... (10.1) (7.4) -
-------------------
Net periodic postretirement
benefits expense................. $13.4 $20.9 $32.9
===================
--------------------------------------------------------
In measuring the APBO, annual trend rates for health
care costs of 8.3%, 9.0% and 12.5% were assumed for
1997, 1996 and 1995, respectively. These rates were
assumed to decline ratably over the subsequent 9-12
years to 5.3% for 1997 and 6.5% for 1996 and 1995, and
remain at that level thereafter. The weighted average
discount rate used in determining the APBO was 8.0% and
8.25% at December 31, 1997 and 1996, respectively.
If the assumed health care cost trend rate changed
by 1%, the APBO as of December 31, 1997 would change by
15%. The effect of a 1% change in the cost trend rate
on the service and interest cost components of net
periodic postretirement benefits expense would be a
change of 18%.
Anheuser-Busch Companies 63
1997 Annual Report
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
8. LONG-TERM DEBT
Long-term debt at December 31 consisted of the following
(in millions):
- -----------------------------------------------------------------
1997 1996
----------------
Commercial Paper (weighted average interest
rates of 5.5% in 1997 and 5.3% in 1996)..... $ 591.9 $155.5
Medium-term Notes Due 1998 to 2001 (interest
rates from 5.5% to 8.0%).................... 62.5 95.0
8.625% Sinking Fund Debentures Maturing 1998
to 2016..................................... 22.5 105.8
8.5% Sinking Fund Debentures Maturing 1998
to 2017..................................... 45.5 45.5
8.75% Notes Due 1999........................... 250.0 250.0
5.1% Japanese yen/Australian dollar Notes
Due 1999.................................... 262.4 262.4
4.1% Japanese yen/U.S. dollar Notes Due 2001... 162.8 -
6.9% Notes Due 2002............................ 200.0 200.0
6.75% Notes Due 2003........................... 200.0 200.0
6.75% Notes Due 2005........................... 200.0 200.0
7% Notes Due 2005.............................. 100.0 100.0
6.75% Notes Due 2006........................... 250.0 250.0
7.1% Notes Due 2007............................ 250.0 -
9% Debentures Due 2009......................... 350.0 350.0
7.25% Debentures Due 2015...................... 150.0 150.0
7.125% Notes Due 2017.......................... 250.0 -
7.375% Debentures Due 2023..................... 200.0 200.0
7% Debentures Due 2025......................... 200.0 200.0
6.75% Debentures Due 2027...................... 100.0 -
Industrial Revenue Bonds (interest rates
from 5.625% to 7.4%)........................ 198.4 157.4
8.3% ESOP Debt................................. 282.1 315.4
Other Long-term Debt........................... 37.5 33.9
-----------------
$4,365.6 $3,270.9
=================
- -----------------------------------------------------------------
Gains/losses on debt redemptions (either individually or in
the aggregate) are not material for any year presented.
In December 1996, simultaneous with the issuance of the
5.1% Japanese yen/Australian dollar notes, the company
entered into a $262.4 million notional amount interest
rate swap and currency exchange agreement. In October 1997,
the company entered into a similar swap and exchange
agreement for the notional amount of the $162.8 million of
4.1% Japanese yen/US dollar notes. Under the agreements, the
counterparties will fund the semi-annual yen-denominated
fixed-rate coupon payments and Anheuser-Busch will make
quarterly LIBOR-based U.S. dollar-denominated floating-rate
payments to the counterparties. The Australian dollar
agreement also requires Anheuser-Busch to pay the
counterparty $262.4 million at maturity in exchange for
the counterparty funding the Australian dollar redemption
liability. The 4.1% dual-currency notes mature in U.S.
dollars.
64 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The impact of the Australian dollar exchange
agreement on the company's 5.1% dual-currency notes at
December 31 is as follows:
-------------------------------------------------------
1997 1996
----------------
5.1% Japanese yen/Australian dollar
Notes Due 1999...................... $209.1 $255.3
Effect of U.S. dollar/Australian
dollar exchange agreement........... 53.3 7.1
----------------
$262.4 $262.4
================
-------------------------------------------------------
Under the terms of the agreements, the U.S. dollar
floating-rate interest payments and the dollar
-denominated redemptions are the only obligations the
company has relating to the dual-currency notes. All
currency exchange risk between the U.S. dollar, the
Australian dollar and the Japanese yen is borne by the
applicable counterparty. Only in the event of
counterparty default, the risk of which the company
considers remote, would Anheuser-Busch be exposed to
currency exchange risk.
The company has in place a single committed
revolving credit agreement totaling $1 billion, which
expires in August 2001. The agreement provides that
under certain circumstances the company may select
among various loan arrangements with differing
maturities and among a variety of interest rates,
including a negotiated rate. At December 31, 1997 and
1996, the company had no outstanding borrowings under
the agreement. Fees under the agreements were $.6
million, $.7 million and $.8 million in 1997, 1996 and
1995, respectively.
At December 31, 1997 and 1996, outstanding
commercial paper borrowings are classified as long-term
debt because commercial paper is maintained on a long
-term basis with ongoing credit support provided by the
revolving credit agreement. The company may also choose
to refinance some or all of its commercial paper debt
with long-term notes or debentures.
In 1989, the company issued $241.7 million of 8%
debentures maturing in 1996 and convertible into
preferred stock at a price of $23.39 each (adjusted for
the September 1996 stock split and the Earthgrains
spin-off). Each share of preferred stock was
convertible into one share of common stock. In
September 1996, the company completed the conversion of
all outstanding convertible debentures. In 1996 and
1995, the company issued 7.5 and 2.8 million common
shares, respectively, in conjunction with conversions.
No preferred shares are outstanding as a result of any
conversions.
The aggregate maturities on long-term debt are $25
million, $544 million, $15 million, $170 million and
$200 million, respectively, for each of the years
ending December 31, 1998 through 2002. These aggregate
maturities do not include the future maturities of the
ESOP debt or commercial paper.
-------------------------------------------------------
9. INCOME TAXES
The provision for income taxes consists of the
following for the three years ended December 31 (in
millions):
------------------------------------------------------
1997 1996 1995
----------------------
Current tax provision:
Federal.................... $510.9 $490.9 $435.4
State and foreign.......... 101.3 106.8 106.4
-----------------------
612.2 597.7 541.8
-----------------------
Deferred tax provision:
Federal.................... 78.2 139.2 (76.6)
State and foreign.......... 13.2 19.9 (10.0)
-----------------------
91.4 159.1 (86.6)
-----------------------
Total tax provision........... $703.6 $756.8 $455.2
=======================
-------------------------------------------------------
Anheuser-Busch Companies 65
1997 Annual Report
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes included in the
Consolidated Statement of Income is as follows (in
millions):
- -----------------------------------------------------------------
1997 1996 1995
Continuing operations.................. $703.6 $736.8 $575.1
Discontinued operations................ - 20.0 (119.9)
-------------------------
Total tax provision.................... $703.6 $756.8 $455.2
=========================
- -----------------------------------------------------------------
The deferred tax provision results from differences in
the recognition of income and expense for tax and financial
reporting purposes. The primary differences for continuing
operations are related to fixed assets (tax effect of $67.8
million in 1997, $56.9 million in 1996 and $45.4 million in
1995) and the Tampa brewery closure benefit ($52.2 million)
in 1995.
At December 31, 1997 the company had deferred tax
liabilities of $1,784.1 million and deferred tax assets
of $490.5 million. The temporary differences included in
deferred tax liabilities are primarily related to fixed
assets ($1,549.6 million). The temporary differences
included in deferred tax assets are related to accrued
postretirement benefits ($203.7 million) and other accruals
and temporary differences ($286.8 million) which are not
deductible for tax purposes until paid or utilized.
A reconciliation between the statutory tax rate and the
effective tax rate for continuing operations for the three
years ended December 31 is presented below:
- -----------------------------------------------------------------
1997 1996 1995
--------------------
Federal statutory tax rate.................. 35.0% 35.0% 35.0%
State taxes, net of federal benefit......... 3.5 3.6 4.0
Other taxes................................. (.1) .3 .3
--------------------
Effective tax rate.......................... 38.4% 38.9% 39.3%
====================
- -----------------------------------------------------------------
- -----------------------------------------------------------------
10. BUSINESS SEGMENTS
The company's principal business segments are beer/beer-
related and entertainment. The beer/beer-related segment
produces and sells the company's beer products. Included
in this segment are the company's raw material acquisition,
malting, can manufacturing, recycling, communications and
transportation operations. The entertainment segment consists
of the company's Sea World, Busch Gardens and other theme
parks and real estate development operations. Sales between
segments and export sales are not material. No single
customer accounted for more than 10% of sales.
66 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized below is the company's business segment
information for 1997, 1996 and 1995 (in millions).
Intrasegment sales have been eliminated from each
segment's reported net sales.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Net Sales (1) | Operating Income (2) (3) (4)
-----------------------------------------------------------
1997 1996 1995 | 1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beer/beer-related..$10,253.5 $10,143.9 $ 9,585.9| $1,939.5 $1,934.2 $1,557.7
Entertainment...... 812.7 739.8 754.6| 113.5 149.6 75.2
-----------------------------|-----------------------------
Consolidated.......$11,066.2 $10,883.7 $10,340.5| $2,053.0 $2,083.8 $1,632.9
===========================================================
-------------------------------------------------------------------------------
</TABLE>
(1) Net sales for 1995 include the adverse impact of
the beer wholesaler inventory reduction of $107
million.
(2) Operating income excludes aggregate net interest
expense and other income and expense of $220.5
million, $190.9 million and $171.2 million, for
1997, 1996 and 1995, respectively.
(3) Operating income for the Entertainment segment in
1996 includes the $54.7 million pretax gain on the
sale of the Cardinals.
(4) Operating income for 1995 includes the impact of
the one-time, pretax charge of $160.0 million for
the closure of the Tampa brewery plus the $74.5
million adverse impact of the beer wholesaler
inventory reduction.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
| Depreciation and
Identifiable Assets (5) | Amortization Expense
------------------------------|----------------------
1997 1996 1995 | 1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beer/beer-related........$ 9,653.4 $ 8,458.6 $ 7,915.4 | $571.0 $508.8 $476.5
Entertainment............ 1,534.7 1,484.3 1,463.1 | 86.8 78.5 77.6
Corporate................ 539.0 520.7 448.4 | 25.9 24.2 19.8
Discontinued operations.. - - 764.0 | - - -
------------------------------------------------------
Consolidated.............$11,727.1 $10,463.6 $10,590.9 | $683.7 $611.5 $573.9
=====================================================
- ------------------------------------------------------------------------------
</TABLE>
(5) Corporate assets principally include cash,
marketable securities and certain fixed assets.
-----------------------------------------------------
Capital Expenditures
----------------------------
1997 1996 1995
----------------------------
Beer/beer-related...... $1,027.9 $ 902.5 $808.8
Entertainment.......... 150.6 151.6 101.9
Corporate.............. 20.8 30.5 41.8
----------------------------
Consolidated........... $1,199.3 $1,084.6 $952.5
============================
-------------------------------------------------------
NEW BUSINESS SEGMENT DISCLOSURES STANDARD
In June 1997, the Financial Accounting Standards
Board issued FAS No. 131, "Disclosures about the
Segments of an Enterprise and Related Information,"
which is effective for the company in calendar 1998.
FAS 131 requires segment information to be reported on
a "management" basis. Adoption of the Standard will
expand the company's operating segment disclosures to
include the following businesses: domestic beer,
international beer, packaging and entertainment.
Anheuser-Busch Companies 67
1997 Annual Report
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------------------
11. SUPPLEMENTAL INFORMATION
The company recorded a $189.4 million adjustment to
the carrying value of its Grupo Modelo-related investments
for cumulative Mexican peso depreciation when it adopted
equity accounting for those investments in 1997. The offset
for the adjustment is to "foreign currency translation" in
the shareholders equity section of the Consolidated Balance
Sheet. The effect of currency exchange rate fluctuations
was not material for 1996 and 1995. Accounts payable include
$123.9 million and $92.8 million, respectively, of
outstanding checks at December 31, 1997 and 1996.
Supplemental information with respect to the Consolidated
Statement of Cash Flows for the three years ended December
31 is presented below (in millions):
- -----------------------------------------------------------------
CASH PAID DURING THE YEAR: 1997 1996 1995
------------------------------
Interest, net of interest
capitalized..................... $ 205.1 $ 208.0 $ 198.0
Income taxes...................... 609.5 533.6 546.6
Excise taxes...................... 1,760.6 1,720.1 1,680.6
NONCASH FINANCING ACTIVITIES:
Conversions of 8% convertible
debentures...................... $ - $ 166.0 $ 67.2
CHANGES IN NONCASH WORKING CAPITAL:
Decrease/(increase) in noncash
current assets:
Accounts receivable............. $ (80.7) $ (88.4) $ 54.2
Inventories..................... (19.1) 51.6 (51.9)
Other current assets............ 35.4 81.6 (17.2)
Increase/(decrease) in current
liabilities:
Accounts payable................ 65.0 44.0 (73.8)
Accrued salaries, wages and
benefits...................... (3.3) (19.4) 8.1
Accrued taxes................... (49.1) 146.7 (10.3)
Restructuring accrual........... - - (50.2)
Other current liabilities....... 57.2 17.6 (120.9)
------------------------------
Decrease/(increase) in noncash
working capital................. $ 5.4 $ 233.7 $ (262.0)
==============================
- -----------------------------------------------------------------
The components of plant and equipment, net, at December 31
are summarized below (in millions):
- -----------------------------------------------------------------
1997 1996
-------------------------
Land................................ $ 243.9 $ 237.9
Buildings........................... 3,355.5 3,172.2
Machinery and equipment............. 8,806.8 8,148.8
Construction in progress............ 821.4 655.8
------------------------
13,227.6 12,214.7
Accumulated depreciation............ (5,477.0) (5,006.5)
------------------------
$ 7,750.6 $ 7,208.2
========================
- -----------------------------------------------------------------
The components of other assets at December 31 are summarized
below (in millions):
- -----------------------------------------------------------------
1997 1996
------------------------
Investment properties............... $ 128.1 $ 129.3
Deferred charges.................... 515.8 483.3
Goodwill............................ 451.9 435.8
------------------------
$ 1,095.8 $ 1,048.4
========================
- -----------------------------------------------------------------
68 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized below is selected financial information
for Anheuser-Busch, Inc. (a wholly-owned subsidiary of
Anheuser-Busch Companies) for the years ended December
31 (in millions):
---------------------------------------------------------
1997 1996 1995
----------------------------
Income Statement Information:
Net sales..................$ 8,116.1 $ 8,100.3 $7,594.9
Gross profit............... 3,141.2 3,172.4 2,889.6
Income from continuing
operations (1) (2)....... 906.8 907.1 713.7
Balance Sheet Information:
Current assets.............$ 623.9 $ 526.9
Noncurrent assets.......... 15,619.0 13,772.8
Current liabilities........ 677.7 671.0
Noncurrent liabilities (1)... 4,599.4 3,569.7
---------------------------------------------------------
(1) Anheuser-Busch, Inc. is co-obligor for
substantially all outstanding Anheuser-Busch
Companies debt. Accordingly, all guaranteed debt is
included as an element of noncurrent liabilities,
with interest thereon included in the determination
of income from continuing operations.
(2) Income from continuing operations for 1995 reflects
the after-tax charge of $99.2 million relating to
the closure of the Tampa brewery plus the $45.2
million after-tax impact of the beer wholesaler
inventory reduction.
-------------------------------------------------------
12. DIVESTITURE OF FOOD PRODUCTS SEGMENT
In the fourth quarter 1995, the company announced
its intention to divest its food products segment and
recorded a $244.3 million net loss provision for the
disposition. The company's baking subsidiary,
Earthgrains, was divested in a tax-free 100% spin-off
to shareholders on March 26, 1996. In June 1996, the
company sold most of its Eagle Snacks production
facilities which effectively completed the divestiture.
Accordingly, the company revised its estimated loss
provision for the disposition of the food products
segment and recorded a $33.8 million after-tax gain
($.07 per share) in the second quarter 1996 which is
reported as income from discontinued operations.
Because the food products segment was discontinued,
amounts in the Consolidated Financial Statements and
related Notes for all periods presented have been
restated to exclude the segment's results.
Anheuser-Busch Companies 69
1997 Annual Report
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sales, income/(loss) before income taxes, and related
income tax provision/(benefit) of the discontinued food
products segment were as follows (in millions):
- -----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------------------------
Sales.................................. $ - $ - $1,985.0
------------------------
Pretax loss............................ $ - $ - $ (29.2)
Tax benefit............................ $ - $ - $ 10.4
------------------------
Net operating loss..................... $ - $ - $ (18.8)
========================
Provision for divestiture:
Pretax gain/(loss) on divestiture.... $ - $ 53.8 $ (318.0)
Direct costs of disposal............. - - (5.0)
Estimated operating losses during
phase-out period................... - - (12.0)
------------------------
53.8 (335.0)
Income tax (provision)/benefit......... - (20.0) 109.5
------------------------
Net gain/(loss) on divestiture of the
food products segment................ $ - $ 33.8 $ (225.5)
========================
Total net income/(loss) from
discontinued operations.............. $ - $ 33.8 $ (244.3)
========================
- -----------------------------------------------------------------
- -----------------------------------------------------------------
13. CLOSURE OF THE TAMPA BREWERY
During the fourth quarter 1995, the company closed its
brewery located in Tampa, Fla., resulting in a nonrecurring,
pretax charge of $160 million ($.19 per share after-tax).
The charge was comprised of the write-down of the carrying
value of plant assets of $113.7 million, employee severance
costs of $19.4 million and other disposal costs of $26.9
million. The majority of the Tampa brewery's plant and
equipment was either sold or disposed during 1996.
- -----------------------------------------------------------------
14. SALE OF THE ST. LOUIS CARDINALS
During the first quarter 1996, the company completed
the sale of its Major League Baseball team, the St. Louis
Cardinals. The sale included Busch Memorial Stadium, nearby
parking garages and other properties in downtown St. Louis.
The sale price was $150 million and resulted in a pretax
gain of $54.7 million ($.06 per share after-tax) which is
presented as a separate line item in the Consolidated
Statement of Income.
70 Anheuser--Busch Companies
1997 Annual Report
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------
15. PREFERRED AND COMMON STOCK
STOCK ACTIVITY
Activity for the company's common stock for the
three years ended December 31 is summarized below:
-------------------------------------------------------
Common Stock Common Stock
Issued in Treasury
-------------------------
BALANCE, DECEMBER 31, 1994....687,595,058 (173,014,344)
Shares issued under stock
plans...................... 4,123,070 -
Conversion of convertible
debentures.................. 2,812,120 -
Treasury stock acquired....... - (13,562,980)
-------------------------
BALANCE, DECEMBER 31, 1995....694,530,248 (186,577,324)
Shares issued under stock
plans....................... 3,726,242 -
Conversion of convertible
debentures.................. 7,535,902 -
Treasury stock acquired,
net of issuances of 433,874. - (21,857,871)
-------------------------
BALANCE, DECEMBER 31, 1996....705,792,392 (208,435,195)
Shares issued under stock
plans....................... 3,472,064 -
Treasury stock acquired....... - (13,808,813)
-------------------------
BALANCE, DECEMBER 31, 1997....709,264,456 (222,244,008)
=========================
-------------------------------------------------------
At December 31, 1997 and 1996, 40,000,000 shares of
$1.00 par value preferred stock were authorized and
unissued.
COMMON STOCK SPLIT
All share and per share amounts have been adjusted
to reflect the two-for-one common stock split
distributed September 12, 1996.
STOCK REPURCHASE PROGRAMS
The Board of Directors has approved various
resolutions authorizing the company to purchase shares
of its common stock for investment purposes and to meet
the requirements of the company's various stock
purchase and incentive plans. The most recent
resolution was approved by the Board in July 1996 and
authorized the repurchase of 50 million shares. The
company acquired 13.8 million, 22.3 million and 13.6
million shares of common stock in 1997, 1996 and 1995
for $587.1 million, $770.2 million and $393.4 million,
respectively. At December 31, 1997, approximately 38.9
million shares were available for repurchase under the
1996 authorization.
STOCKHOLDER RIGHTS PLAN
The Board of Directors adopted a Stockholder Rights
Plan in 1985 (extended in 1994) which in certain
circumstances would permit shareholders to purchase
common stock at prices substantially below market
value.
Anheuser-Busch Companies 71
1997 Annual Report
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------------------------
16. COMMITMENTS AND CONTINGENCIES
In connection with plant expansion and improvement
programs, the company had commitments for capital
expenditures of approximately $143 million at December
31, 1997. Obligations under capital and operating leases
are not material.
The company and certain of its subsidiaries are
involved in certain claims and legal proceedings in
which monetary damages and other relief are sought.
The company is vigorously contesting these claims.
However, resolution of these claims is not expected
to occur quickly, and their ultimate outcome cannot
presently be predicted. It is the opinion of management
that the ultimate resolution of all existing claims,
legal proceedings and other contingencies, either
individually or in the aggregate, will not materially
affect either the company's financial position, liquidity
or results of operations.
- -----------------------------------------------------------------
17. EARNINGS PER SHARE OF COMMON STOCK
In February 1997, the Financial Accounting Standards
Board issued FAS No. 128, "Earnings Per Share (EPS),"
effective for the company in the 1997 calendar year.
FAS 128 simplified EPS calculations and requires the
reporting of "basic" and "diluted" EPS to replace the
former primary and fully diluted EPS, respectively. The
company has adopted FAS 128 for 1997 annual results and
restated all previously reported EPS. Adoption of FAS 128
resulted in a slight increase in basic EPS compared to
primary EPS for all years presented. There was no change
in diluted EPS compared to fully diluted EPS.
Reconciliations of income available to common shareholders
and weighted average shares outstanding between basic and
diluted EPS for the three years ended December 31 follow
(in millions):
- -----------------------------------------------------------------
WEIGHTED AVERAGE SHARES OUTSTANDING
- -----------------------------------------------------------------
1997 1996 1995
-------------------
Basic weighted average shares outstanding.... 492.6 499.1 510.9
Stock option shares.......................... 7.1 6.7 4.8
Shares related to convertible debentures..... - 4.8 8.7
-------------------
Diluted weighted average shares outstanding.. 499.7 510.6 524.4
===================
- -----------------------------------------------------------------
- -----------------------------------------------------------------
INCOME AVAILABLE TO COMMON SHAREHOLDERS
- -----------------------------------------------------------------
1997 1996 1995
------------------------
Basic income from continuing operations. $1,179.2 $1,156.1 $886.6
After-tax interest on convertible
debentures............................ - 5.3 10.3
------------------------
Diluted income from continuing
operations............................ $1,179.2 $1,161.4 $896.9
========================
- -----------------------------------------------------------------
72 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------
18. COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards
Board issued FAS No. 130, "Reporting Comprehensive
Income," which is effective for the company in 1998.
The adoption of FAS 130 will modify the format the
company uses to report noncash changes in shareholders
equity. These changes will be shown together with net
income in a new financial statement category entitled
"comprehensive income." Adoption of FAS 130 will not
impact the results of the company's operations.
-------------------------------------------------------
19. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended
December 31, 1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales................ $2,462.9 $2,994.3 $3,101.6 $2,507.4 $11,066.2
Gross Profit............. 865.9 1,124.7 1,178.0 800.7 3,969.3
Income from
Continuing Operations.. 257.7 381.2 393.5 146.8 1,179.2
Cumulative Effect of
Accounting Change...... - - - (10.0) (10.0)
--------------------------------------------------------------------------------
Net Income............... $ 257.7 $ 381.2 $ 393.5 $ 136.8 $ 1,169.2
--------------------------------------------------------------------------------
Diluted Earnings per Share:
Income from
Continuing Operations... $ .51 $ .76 $ .79 $ .30 $ 2.36
Cumulative Effect of
Accounting Change....... - - - (.02) (.02)
--------------------------------------------------------------------------------
Net Income............... $ .51 $ .76 $ .79 $ .28 $ 2.34
--------------------------------------------------------------------------------
Year Ended
December 31, 1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual
--------------------------------------------------------------------------------
Net Sales................ $2,371.8 $2,961.1 $3,063.5 $2,487.3 $10,883.7
Gross Profit............. 833.7 1,114.8 1,177.8 792.8 3,919.1
Income from
Continuing Operations.. 275.5 353.4 377.2 150.0 1,156.1
Income from Discontinued
Operations............. - 33.8 - - 33.8
--------------------------------------------------------------------------------
Net Income............... $ 275.5 $ 387.2 $ 377.2 $ 150.0 $ 1,189.9
--------------------------------------------------------------------------------
Diluted Earnings per Share:
Income from Continuing
Operations............. $ .53 $ .70 $ .74 $ .30 $ 2.27
Income from Discontinued
Operations ............ - .07 - - .07
--------------------------------------------------------------------------------
Net lncome............... $ .53 $ .77 $ .74 $ .30 $ 2.34
--------------------------------------------------------------------------------
</TABLE>
First quarter 1996 income from continuing operations
includes the nonrecurring after-tax gain of $33.4
million ($.06 per share) related to the sale of the St.
Louis Cardinals.
Anheuser-Busch Companies 73
1997 Annual Report
<PAGE> 41
Financial Summary Operations
Anheuser-Busch Companies and Subsidiaries
<TABLE>
<CAPTION>
(In millions, except per share data)
- -------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS:
Barrels of beer sold................ 96.6 95.1 90.9
-------------------------------------------
Sales............................... $12,832.4 $12,621.5 $12,004.5
Federal and state excise taxes.... 1,766.2 1,737.8 1,664.0
-------------------------------------------
Net sales........................... 11,066.2 10,883.7 10,340.5
Cost of products and services..... 7,096.9 6,964.6 6,791.0
-------------------------------------------
Gross profit........................ 3,969.3 3,919.1 3,549.5
Marketing, distribution and
administrative expenses......... 1,916.3 1,890.0 1,756.6
Gain on sale of St. Louis Cardinals 54.7
Shutdown of Tampa brewery......... - - 160.0
Restructuring charge.............. - - -
------------------------------------------
Operating income.................... 2,053.0 2,083.8(2) 1,632.9(3)
Interest expense.................. (261.2) (232.8) (225.9)
Interest capitalized.............. 42.1 35.5 24.3
Interest income................... 7.9 9.4 9.9
Other income/(expense), net....... (9.3) (3.0) 20.5
------------------------------------------
Income before income taxes.......... 1,832.5 1,892.9(2) 1,461.7(3)
Income taxes (current and deferred) 703.6 736.8 575.1
Revaluation of deferred tax
liability under FAS 109......... - - -
Equity income, net of tax......... 50.3 - -
-----------------------------------------
Income from continuing operations... 1,179.2 1,156.1(2) 886.6(3)
Income/(loss) from discontinued
operations........................ - 33.8 (244.3)
-----------------------------------------
Income before accounting changes.... 1,179.2 1,189.9 642.3
Cumulative effect of accounting
changes........................... (10.0)(1) - -
-----------------------------------------
NET INCOME.......................... $1,169.2 $1,189.9 $ 642.3
=========================================
BASIC EARNINGS PER SHARE:
Continuing operations............... $ 2.39 $ 2.31 $ 1.73
Discontinued operations............. - .07 (.47)
-----------------------------------------
Income before accounting changes.... 2.39 2.38 1.26
Cumulative effect of accounting
changes........................... (.02)(1) - -
-----------------------------------------
Net income.......................... $ 2.37 $ 2.38 $ 1.26
=========================================
DILUTED EARNINGS PER SHARE:
Continuing operations............... $ 2.36 $ 2.27(2) $ 1.71(3)
Discontinued operations............. - .07 (.47)
-----------------------------------------
Income before accounting changes.... 2.36 2.34 1.24
Cumulative effect of accounting
changes........................... (.02)(1) - -
-----------------------------------------
Net income.......................... $ 2.34 $ 2.34 $ 1.24
=========================================
Cash dividends paid:
Common stock...................... 492.6 458.9 429.5
Per share......................... 1.00 .92 .84
Preferred stock ($3.23 per share).
Weighted average number of common shares:
Basic............................. 492.6 499.1 510.9
Diluted........................... 499.7 510.6 524.4
- ------------------------------------------------------------------------------
</TABLE>
Note: All per share information and average number of common
shares data reflect the September 12, 1996 two-for-one stock
split and the 1997 adoption of FAS 128, "Earnings per Share,"
as applicable. All financial information has been restated to
recognize the 1995 divestiture of the food products segment.
All amounts include the acquisition of Sea World as of December
1, 1989. Financial information for 1987 has been restated to
reflect the 1988 adoption of FAS 94, "Consolidation of Majority-
Owned Subsidiaries."
(1) 1997 change in accounting for deferred systems reengineering
costs, net of tax benefit of $6.2 million. 1992 change in
accounting for income taxes and postretirement benefits, net
of tax benefit of $186.4 million.
(2) 1996 results include the impact of the gain on the sale of
the St. Louis Cardinals. Excluding the Cardinal gain,
operating income, pretax income, income from continuing
operations and diluted earnings per share would have been
$2,029.1 million, $1,838.2 million, $1,122.7 million and
$2.21, respectively.
74 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 42
FINANCIAL SUMMARY OPERATIONS
Anheuser-Busch Companies and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
91.3 89.7 88.9 87.9 88.1 82.2 79.9 77.3
==================================================================================
$11,705.0 $11,147.3 $11,008.6 $10,631.9 $9,716.1 $8,553.7 $8,120.5 $7,605.0
1,679.7 1,679.8 1,668.6 1,637.9 868.1 802.3 781.0 760.7
- ----------------------------------------------------------------------------------
10,025.3 9,467.5 9,340.0 8,994.0 8,848.0 7,751.4 7,339.5 6,844.3
6,492.1 6,167.6 6,051.8 5,953.5 5,963.4 5,226.5 4,878.1 4,467.1
- ----------------------------------------------------------------------------------
3,533.2 3,299.9 3,288.2 3,040.5 2,884.6 2,524.9 2,461.4 2,377.2
1,679.9 1,612.1 1,583.7 1,409.5 1,364.9 1,244.3 1,245.2 1,274.4
- - - - - - - -
- - - - - - - -
- 401.3 - - - - - -
- ----------------------------------------------------------------------------------
1,853.3 1,286.5(4) 1,704.5 1,631.0 1,519.7 1,280.6 1,216.2 1,102.8
(219.3) (205.1) (194.6) (234.0) (277.2) (172.9) (134.6) (114.1)
21.8 35.2 46.9 45.6 52.5 49.8 42.9 38.9
2.6 3.4 4.4 6.6 4.3 7.9 9.8 12.8
17.6 21.0 (2.5) 1.3 (16.5) 17.7 (15.5) 3.9
- ----------------------------------------------------------------------------------
1,676.0 1,141.0(4) 1,558.7 1,450.5 1,282.8 1,183.1 1,118.8 1,044.3
661.5 452.6 594.6 549.6 481.4 438.2 422.0 439.1
- 31.2 - - - - - -
- - - - - - - -
- ----------------------------------------------------------------------------------
1,014.5 657.2(4) 964.1 900.9 801.4 744.9 696.8 605.2
17.6 (62.7) 30.1 38.9 41.0 22.3 19.1 9.5
- ----------------------------------------------------------------------------------
1,032.1 594.5 994.2 939.8 842.4 767.2 715.9 614.7
- - (76.7)(1) - - - - -
- ----------------------------------------------------------------------------------
$ 1,032.1 $ 594.5 $ 917.5 $ 939.8 $ 842.4 $ 767.2 $ 715.9 $ 614.7
===================================================================================
$ 1.93 $ 1.20 $ 1.71 $ 1.59 $ 1.42 $ 1.32 $ 1.20 $ 1.13
.04 (.11) .05 .06 .07 .04 .04 .02
- -----------------------------------------------------------------------------------
1.97 1.09 1.76 1.65 1.49 1.36 1.24 1.15
- - (.13)(1) - - - - -
- -----------------------------------------------------------------------------------
$ 1.97 $ 1.09 $ 1.63 $ 1.65 $ 1.49 $ 1.36 $ 1.24 $ 1.15
===================================================================================
$ 1.90 $ 1.20(4)$ 1.68 $ 1.56 $ 1.40 $ 1.30 $ 1.19 $ 1.00
.04 (.11) .05 .06 .07 .04 .04 .02
- -----------------------------------------------------------------------------------
1.94 1.09 1.73 1.62 1.47 1.34 1.23 1.02
- - (.13)(1) - - - - -
- -----------------------------------------------------------------------------------
$ 1.94 $ 1.09 $ 1.60 $ 1.62 $ 1.47 $ 1.34 $ 1.23 $ 1.02
===================================================================================
398.8 370.0 338.3 301.1 265.0 226.2 188.6 148.4
.76 .68 .60 .53 .47 .40 .33 .27
- - - - - - - - 20.1
524.6 544.3 563.7 568.0 563.7 565.5 577.1 533.8
538.0 558.6 581.6 585.8 579.4 572.4 584.4 603.0
- ------------------------------------------------------------------------------------
</TABLE>
(3) 1995 results include the impact of the one-time pretax
charge of $160 million for the closure of the Tampa brewery,
and the $74.5 million pretax impact of the beer wholesaler
inventory reduction. Excluding these nonrecurring special
items, operating income, pretax income, income from
continuing operations and diluted earnings per share would
have been $1,867.3 million, $1,696.2 million, $1,032.3
million and $1.99, respectively.
(4) 1993 results include the impact of two nonrecurring special
charges. These charges are (1) a restructuring charge ($401.3
million, pretax) and (2) a revaluation of the deferred tax
liability due to the 1% increase in federal tax rates ($31.2
million, after-tax). Excluding these nonrecurring special
charges, operating income, pretax income, income from
continuing operations and diluted earnings per share would
have been $1,687.8 million, $1,542.3 million, $935.2 million
and $1.69, respectively.
Anheuser-Busch Companies 75
1997 Annual Report
<PAGE> 43
FINANCIAL SUMMARY BALANCE SHEET AND OTHER INFORMATION
Anheuser-Busch Companies and Subsidiaries
<TABLE>
<CAPTION>
(In millions, except per share and statistical data)
- --------------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
BALANCE SHEET INFORMATION:
Working capital (deficit)....................$ 83.2 $ 34.9 $ 268.6
Current ratio................................ 1.1 1.0 1.2
Plant and equipment, net..................... 7,750.6 7,208.2 6,763.0
Long-term debt............................... 4,365.6 3,270.9 3,270.1
Total debt to total capitalization ratio..... 51.9% 44.8% 47.1%
Deferred income taxes........................ 1,293.6 1,208.1 1,132.8
Shareholders equity.......................... 4,041.8 4,029.1 4,433.9
Return on shareholders equity................ 29.2%(1) 30.0%(2) 25.0%(3)
Book value per share......................... 8.30 8.10 7.22
Total assets................................. 11,727.1 10,463.6 10,590.9
OTHER INFORMATION:
Capital expenditures.........................$ 1,199.3 $ 1,084.6 $ 952.5
Depreciation and amortization................ 683.7 611.5 573.9
Effective tax rate........................... 38.4% 38.9% 39.3%
Price/earnings ratio......................... 18.6 (1) 17.6 (2) 19.6(3)
Percent of pretax profit on net sales........ 16.6% 17.4% 14.1%
Market price range of common stock
(high and low closing).................... 477 8-391 2 427/8-321/2 34-253/8
- ----------------------------------------------------------------------------------------
</TABLE>
Note: All share and per share information reflects the September
12, 1996 two-for-one stock split. All financial information has
been restated to recognize the 1995 divestiture of the food
products segment. All amounts include the acquisition of Sea
World as of December 1, 1989. Financial information for 1987 has
been restated to reflect the 1988 adoption of FAS 94,
"Consolidation of Majority-Owned Subsidiaries."
(1) These ratios have been calculated based on income from
continuing operations before the cumulative effect of
accounting changes.
(2) These ratios have been calculated based on reported income
from continuing operations, which includes the $54.7 million
pretax gain on the sale of the St. Louis Cardinals. Excluding
the Cardinal gain, return on shareholders equity would have
been 29.2% and the price/earnings ratio would have been 18.1.
(3) These ratios have been calculated based on reported income
from continuing operations. Excluding the two nonrecurring
1995 items ($160 million pretax charge for closure of the
Tampa brewery and $74.5 million impact of the beer wholesaler
inventory reduction), return on shareholders equity would
have been 29.1% and the price/earnings ratio would have been
16.8.
(4) These ratios have been calculated based on reported income
from continuing operations. Excluding the two nonrecurring
1993 charges ($401.3 million pretax restructuring charge and
$31.2 million after-tax FAS 109 charge), return on
shareholders equity would have been 26.7% and the
price/earnings ratio would have been 13.8.
76 Anheuser-Busch Companies
1997 Annual Report
<PAGE> 44
FINANCIAL SUMMARY BALANCE SHEET AND OTHER INFORMATION
Anheuser-Busch Companies and Subsidiaries
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 57.0 $ (41.3) $ 247.8 $ 107.9 $ (62.8) $ (82.8) $ (23.7) $ 42.5
1.0 1.0 1.2 1.1 0.9 0.9 1.0 1.0
6,494.6 6,454.7 6,424.7 6,260.6 6,102.2 5,768.0 4,624.2 4,177.4
3,066.4 3,019.7 2,630.3 2,627.9 3,115.8 3,268.9 1,570.0 1,366.4
47.3% 47.3% 42.0% 43.9% 54.5% 60.7% 41.7% 40.6%
1,081.5 1,013.1 1,065.5 1,401.0 1,309.3 1,241.9 1,155.8 1,123.7
4,415.5 4,255.5 4,620.4 4,438.1 3,679.1 3,099.9 3,102.9 2,892.2
29.9% 18.8%(4) 27.6%(1) 30.2% 34.0% 34.6% 33.3% 31.8%
6.64 6.31 6.51 5.90 4.60 3.74 3.87 3.40
10,547.4 10,267.7 9,954.9 9,642.5 9,274.2 8,690.1 6,788.9 6,260.3
$ 662.8 $ 656.3 $ 628.8 $ 625.5 $ 805.3 $ 979.0 $ 858.1 $ 716.9
517.0 492.7 453.3 437.0 404.3 333.1 306.5 267.9
39.5% 42.4% 38.1% 37.9% 37.5% 37.0% 37.7% 42.0%
13.1 22.6(4) 16.9(1) 18.9 14.6 14.4 12.9 16.4
16.7% 12.1% 16.7% 16.1% 14.5% 15.3% 15.2% 15.3%
275/8- 30-22 301/4-26 303/4- 221/2- 227/8- 17-141/2 197/8-
231/2 193/4 171/8 151/4 131/4
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
APPENDIX
In Exhibit 13 to the printed Form 10-K, the following bar
graphs appear, all depicting data for 1993, 1994, 1995, 1996 and
1997: on page 37, "SALES" depicting gross sales and net sales in
billions of dollars; on page 40, "TOTAL EMPLOYEE-RELATED COSTS"
depicting total employee-related costs in millions of dollars; on
page 41, "OPERATING INCOME" depicting operating income in
millions of dollars; on page 42, "INCOME FROM CONTINUING
OPERATIONS/DIVIDENDS ON COMMON STOCK" depicting income from
continuing operations and dividends in millions of dollars; on
page 40, "FULLY DILUTED EARNINGS PER SHARE FROM CONTINUING
OPERATIONS" depicting fully diluted earnings per share data; on
page 43, "CASH FLOW FROM CONTINUING OPERATIONS" depicting cash
flow from continuing operations in millions of dollars; on page
44, "CAPITAL EXPENDITURES/DEPRECIATION AND AMORTIZATION"
depicting capital expenditures and depreciation and amortization
in millions of dollars; and, on page 45, "SHAREHOLDERS
EQUITY/LONG-TERM DEBT" depicting shareholders equity and long-
term debt in millions of dollars.
EX-21
SUBSIDIARIES OF ANHEUSER-BUSCH COMPANIES, INC.
---------------------------------------------
STATE OF DOING BUSINESS
NAME OF COMPANY INCORPORATION UNDER NAME OF
- --------------- -------------- -------------
Anheuser-Busch, Incorporated Missouri Anheuser-Busch, Incorporated
Anheuser-Busch International, Delaware Anheuser-Busch International,
Incorporated Incorporated
Busch Entertainment Corporation Delaware Busch Entertainment Corporation
Metal Container Corporation Delaware Metal Container Corporation
Busch Agricultural Resources, Inc. Delaware Busch Agricultural Resources, Inc.
All other subsidiaries of the Company, considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary as of
December 31, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from
the Form 10-K for the fiscal year ended December 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
0
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